How can we define NFTs and what are their principal features?
An NFT (non-fungible token) is an ownership record of an asset (digital or physical) recorded in a log or digital (“ledger”) that uses “blockchain” technology.
It is “non-expendable” because it is unique and irreplaceable. That is to say, it cannot be exchanged for another which is the same. For example, on the contrary, a thousand colones bill is “expandable” because it can be exchanged for another and it is worth the same. An NFT then is a record that detonates that the asset is unique or “original” and the owner has rights over its use.
When it comes to a digital asset (an image, video, a song, etc.) and given the ease of copying the work, NFTs of the digital asset allow the determination of the work’s authenticity and use blockchain to determine its property.
What is the relationship between the NFTs and cryptocurrencies?
The “T” in NFT refers to a “token” or register in a blockchain of the property of the work. So, NFTs use the same blockchain as the cryptocurrencies. In fact, the first and the majority of the NFTs were created from a standard of the token named Ethereum.
What’s the technology behind NFTs? How are they created?
Ethereum is the most important technology for NFTs nowadays. You would use a digital wallet like Ethereum to create an NFT via the digital market of NFTs called OpenSea. But this is not the only way to create them. On the website Sourceforge, there is a list of twenty apps and websites to create NFTs.
In what areas are NFTs being used nowadays?
A digital work creator (an image, video, a song, etc.) can use an NFT to validate the property of the work and afterwards, when they want to sell it, the new owner’s token is added to the blockchain to show the work now belongs to someone else.
This is what happens nowadays with original works of art when they are passed from one owner to another. Someone intercedes to authenticate the work as original so the sale can go through and to assure the buyer that their purchase is original. For this reason, the original work of a Guayasamín is sold for millions of colones while copies of a picture are sold for thousands of colones.
Video games can use NFTs to sell a digital ítem in a game to a single owner, so they know it is unique and authentic.
NFTs have been created with videos of important moments in sports like collectable cards.
The company NIKE is exploring the use of NFTs to verify the authenticity of the shoes as a way to prevent knockoffs of their products.
What future do NFTs have? Will they continue growing or could there be other applications or, on the contrary, are they a momentary trend?
NFTs are only starting to gain validity as a part of the digital ecosystem as a type of “smart contracting”. Blockchain is already an essential technology for many types of transactions, not only for cryptocurrencies. It can be applied to contracts, insurance, accounting, cargo transfer in logistic systems, the exchange of assets such as physical and digital properties amongst many more. NFT is included in this digital ecosystem as a tool to ensure authentication and ownership.