The definition of NFT is "non-fungible token," or a file that is not consumed by use or transfer. The acronym NFT (Non-Fungible Token) was very popular several months ago. High-profile artists and all kinds of entertainment companies, such as the NBA, WWE, and Warner Bros., have embraced the NFT trend.
Their popularity was rapid and fleeting. They experienced a huge surge in followers at the beginning of the year, but interest waned just a few months later. What do NFTs offer ? What are NFTs ? What are their uses ? In this article, we'll try to explain it in a simple way.
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Definition of NFT
NFT stands for “Non Fungible Token”. From there we get two concepts for the definition of NFT:
- Token: a unit of value given by a market, organization, or states. In the present case, a token would be the NFT file, as in another way the files that contain Ethereum, or Bitcoins can be.
- Non-expendable: It means that it is not destroyed by use and cannot be divided.
What is an NFT and how do they work?
Thus, a non-fungible Token is a file that cannot be destroyed or consumed by its use. In the case of NFTs, it is a file attached to the blockchain of Ethereum, Cardano, Solana or any other blockchain. The blockchain is used to maintain its integrity and not be copied, falsified or even moved to other media without the blockchain chain verifying it. This creates essentially unique files.
The idea behind NFTs is that they serve as proof of authenticity and ownership of an online file. Or at least that's one of their main uses. This could lead to many other applications, such as unique clothing through augmented reality, card games, the creation of virtual art galleries, or a file that unlocks numerous unlockables in different games with just one file installed or accessible through a wallet.
What is an example NFT?
Let's say we want to create an exclusive NFT for Hardwaresfera users. And we want to use our logo. We take the logo that's on our servers and link to the URL through NFT minting services by purchasing cryptocurrencies that support these smart contracts, such as Ethereum, Solana, or Cardano.
The NFT is that smart contract that links to our logo. You do not own our logo, but the NFT that links to it. The NFT will be hosted on the blockchain that we have decided to have it, and you will be able to link it in compatible wallets. What uses can it give? It depends on being given support in communities and websites such as access to exclusive content, access privileges... This NFT can then be transferred to other people, either as a gift or as a sale. You cannot destroy or copy it, since the very nature of the decentralized blockchain means that it cannot be destroyed, or at least it is easy for us to do so.
This is a basic example, but NFTs can link to posts, tweets, images, videos… The usefulness of the smart contract itself already depends on the support that can be given to it.
Frequent doubts about NFTs
What is an NFT in a nutshell?
A digital certificate of possession of a work or object.
How much does an NFT cost?
Depends. The seller of the NFT will be able to decide the price at which he wants to sell it, and whether the gas fees and commissions to the blockchain miners are paid by the buyer or the seller. There is no fixed or unified price for NFTs, even within the same series.
How does the sale of NFTs work?
You can go to open NFT markets or use the private route. In open markets, you can search for NFTs, look at them and see if you want to own any. After paying the indicated price and the commissions, the transfer from the original holder to the new one is processed, using a piece of information in the blockchain, because they are moving coins that allow the smart contract that is the NFT itself.
How is an NFT sold?
The most common is that it is put up for sale in a market such as Opensea. The portal acts as an intermediary for cryptocurrency and NFT transactions between wallets. The creator himself can also sell the NFTs by sending them to the recipient's wallet.
How are NFTs made?
This is the process of minting an NFT. It is necessary to have something that can be linked using NFT, be it an image, a website, a text or any other digital element. You need to buy a batch of cryptocurrencies that allows you to store enough information about the NFT, and thus link to the object from which an NFT is made to carry out the minting and transfer.
If I have the NFT, do I own the rights to a digital work?
It's very difficult to say, given that the law hasn't been updated to reflect new technologies . If you have an NFT of a digital photograph, the NFT states that you own the NFT. This doesn't imply that you have the right to make copies and profit from them, nor that you will be the sole owner of all the copies of the image that people make. The NFT itself links to the file over which you hold ownership, secured by a blockchain.
Nor does it mean that by having the NFT of the work, you are its legal owner. The .json file is just a file with a text and signature stating that whoever has it is its owner. But its legal implications outside the blockchain are debatable. It is possible for an NFT to link to a file and not have been made by the original creator.
Simply put, you can own an official Louvre NFT of Leonardo da Vinci's Mona Lisa, but that doesn't mean you are the legal owner of the actual Mona Lisa at the Louvre . Legally, you may own the file hosted by the Louvre on a server for the NFT image, which the NFT references. This file wouldn't be unique to you, as NFTs link to a file in most cases. Legality in this regard is relatively uncommon, and ownership is largely based on the blockchain on which it's hosted.
There are some NFTs in which the right to commercial use of a work is implicit, such as that of the Bored Ape Yatch Club. Some NFTs include a PDF in which they give copyright to the work. There have been numerous cases of rights use with these monkeys such as a hamburger restaurant, an animated series, and a live-action/animated hybrid series with Seth Rogen that had to be canceled when Rogen's account was hacked and he lost his monkey, but as The ownership of the NFT has the commercial right, Seth Rogen could not profit.
Can I download the file with the NFT?
As a general rule, NFTs are very light files because they are lines of code and text, because a larger file would require a much higher energy cost for its minting and distribution, and because the blockchain blocks cannot contain much. information. For everyone's convenience, the file you download links to one hosted on a third-party server or has a hash that is interpreted by certain services and websites.
This carries the risk that if the original file disappears, your NFT will become unusable . This has happened when some files were deleted from the servers hosting them, either manually or because they were hosted on free servers and subsequently replaced.
What are NFTs and how to make money?
Whether you're a creative professional, an amateur, or an investor, if you make the right decisions, you can make money with NFTs. It's not easy, and there's no single right path. You'll need an Ethereum wallet or one from any blockchain with smart contracts that supports NFTs, and you'll need to spend money on tokens to store those contracts. It's crucial to understand the basics of investing and its unwritten rules, the first of which is that you should never invest money you can't afford to lose, because you could lose everything.
You have to take into account market activity, minting costs, transfer fees… There are many costs that go beyond simply investing money and trading. There are cases of professional artists who have managed to make money with NFTs, but they are just a few success stories compared to just as many that don't. Many others have taken risks and haven't achieved enough sales to cover the costs of the tokens they invested in, and that's the most common scenario.
How to sell an NFT without gas?
If you mean to sell it at no cost to you, some markets will make the cost of the gas fall on the buyer himself, and not on you.
How to create a successful NFT?
It's complicated and it's not a formula for success. There is the case of the successful Bored Ape Yacht Club, which is an amalgamation of ideas so that people have a better perception of them. First of all, NFT itself gives you commercial exploitation rights, which is a step beyond many NFT projects that just sell it to you and that's it. The BAYC organization managed to make deals with celebrity management agencies, so that Jimmy Fallon and Paris Hilton were contractually obligated to talk about the NFTs they had been given, even though they really had no interest. Also, they have an economic and technological project behind it, since BAYC allows owners to go to physical parties and private rooms in metaverses.
This is an example of what makes the most successful NFT series. But be careful, because it does not mean that if you imitate it, it will work out for you.
How to make NFT a digital work?
Some markets like Opensea allow you to do it easily. You register, link to your portfolio and upload the work you want to make an NFT of. As soon as the purchase is made, the NFT will be minted and they can go to another wallet.
How to make a free NFT?
Opensea allows you to upload them at no cost, since the minting is the responsibility of the buyer.
How to work with NFT?
if you want to make a program that works with NFT, you have to make it compatible. Remember that an NFT contains a very limited amount of information, and the overall result is created on an external server. An example is that of Axie Infinity, in which the monsters that are fought are generated with parameters within the NFT and it is the game client itself, locally or on the web, that responds with the parameters of the NFT that you have linked.
It should be noted that the compatibility of NFT between various programs is possible, but they need to be compatible with each other, and it is not an automatic process.
What are NFTs and why are they bad?
There are many complaints that users have raised about NFTs. The first is their power consumption, exacerbated mainly by the overuse of the Ethereum blockchain during the Proof of Work era , which is now Proof of Stake.
There have also been many cases of investor scams. There have been many operations deliberately made to take money from investors who did not want the crypto art market to pass them by.
Another complaint is that in video games, they're trying to eliminate the pay-to-earn model , meaning playing to acquire items to sell. First, this turns playing video games into a job. Second, examples of this already exist, and these models are highly dependent on there being people interested in buying those digital items at the right price. Anyone who has sold Counter-Strike: Global Offensive crates or Steam trading cards knows that over time, these digital products depreciate because eventually, there's no longer enough interest in them.
Finally, there's the issue of trying to implement them without providing substantial benefits to users. There are fears that as metaverses develop , NFTs will become the only way to access personalized content like clothing and avatars . This is a desire to monetize things that are normally free and open source, and that nothing should truly be shared or public—the latter being something the internet has grown into.
The rise and fall of crypto art
First steps and promises
2021 was the year of the NFT, but this technology has existed since contracts could be added to the Ethereum blockchain. At the end of 2020, professional artists began accepting cryptocurrency payments, and shortly after, they started selling what's known as crypto art —a term now being used to refer to NFTs. But not all NFTs are crypto art; they can also be text documents or legal contracts.
The idea behind crypto art for creative professionals was to limit the ownership of digital files in order to produce a limited run of their own works. This creates the digital equivalent of an official print run , like those produced by artists such as Keith Haring with many of his popular works.
In spring 2021, the acronym NFT and the word crypto art began to sound a lot in the technological world due to the arrival of investors, and artists who wanted one more way to monetize their works. There were also many promises to revolutionize the fashion market, collectible card games, video game DLCs ... Many people began to invest heavily in this market, so that many millions were moved in mints, transactions and fees.
Criticisms of crypto art and its technology
But despite its popularity, many voices came out against the promises of the NFTs. In the first place, that of giving greater benefits to artists, which although it is true, this is only accessible to those who have a following and can make there is expectation and desire to have their work. Because the art of an artist who has worked on high-caliber games is not the same as that of a Nobel artist.
There's also the issue of Ethereum's high energy consumption across all its operations. There have always been promises that once it transitions to 100% renewable energy, the consumption problem would be eliminated, but renewable and sustainable energy is still far from supplying all of the blockchain's energy needs. Because of this, many potential investors either didn't participate or abandoned the idea as soon as they saw the energy consumption or the associated costs. Ethereum has moved to Proof of Stake as a way to secure its future in the tech world, given the potential of smart contracts.
It should also be understood that many NFTs are based on Proof of Stake blockchains, such as Cardano or Solana, which are less polluting. But being blockchains less popular, therefore they are not as popular.
Deflation and devaluation
Numerous creatives and companies entered the market to profit from NFTs , but the market quickly began to decline. Interest in what NFT technology offered waned. Its potential applications were already present, such as file verification systems like those used for airline tickets or concert passes. The crypto art market became plagued by the same problems as the traditional art market.
All this explains that, today, NFTs have not disappeared but the general and massive interest in them has. Until technology adapts, improves and becomes more accessible and useful for home users, technology will remain a field of testing and experimentation dedicated to the most enthusiastic about technological innovations.
The traditional art market made digital
In this article we have mentioned that the art market has been a replica of the traditional art market. The one who sells paintings by modern or established artists for hundreds, thousands, hundreds of thousands or millions of dollars. Exactly the same has happened to crypto art as to the traditional art market: it was filled with speculators.
Many pieces reached extremely high prices on Ethereum compared to others, such as a work by Sakimichan that started with a 5 ETH price tag. This price was possible because Sakimichan is well-known and has hundreds of thousands of followers, giving her significant recognition and allowing her to command a higher initial price for her work. Furthermore, the fact that one of her pieces sold for a high price would immediately drive up the price of her other works among potential buyers.
On the other side are the problems of money laundering or joining the black market to which the cryptocurrency market itself has been subjected. As it contains the security and privacy of cryptocurrencies, it is difficult to track buyers and sellers because the wallets are anonymous, which fuels insecurity.
Much is said about the true value , mainly in terms of resale value. But the reality is that its value is what you yourself assign to it, and what someone else is willing to pay for it. Ultimately, the market has been overwhelmed by investors seeking financial gain, without any real intention of supporting the creators.
Alternatives to crypto art to support artists
One of the maxims of the NFTs is that they encouraged many creative professionals to sell their works as a way to earn money by ignoring and collecting royalties. But this only works if you have a large following with high purchasing power to be able to pay for the minting and all the necessary transactions until it is possible to live on the royalties per transaction. But even royalties are extinguished due to disinterest.
If you want to financially support an artist, there are better and much more sustainable and efficient options:
- Request custom art commissions
- Buy their merchandising, since it is rare that it does not have an online page
- Donate money to them via PayPal or Ko-Fi
- Support them regularly on Patreon
What is it that gives value to an NFT?
Value is given by what people are willing to pay for it. It depends on what people want it, and that has many ways of being interpreted. Generally if it is a large and famous collection, if the tokens are common, or even unique parameters of the NFT such as a skin color or a rare accessory that is generated.
What is the most expensive NFT in history?
There are several conflicting records about the most expensive NFT in history, in a sale recorded on the blockchain, is CryptoPunk #5822. 23,7 million dollars were paid for it, on February 12, 2020. It has only been paid for it once, according to the OpenSea portal.
Then there’s the case of Beeple’s “Everydays: The First 5000 Days.” It sold for a staggering $69 million at a Christie’s auction. According to one record, Cryptopunk #5822 would be the fourth most expensive NFT ever sold.
What can you do with an NFT?
You can own it, display it, and use it in other ways permitted by the NFT creators. It's important to know if your purchase includes commercial exploitation rights , as it's not common for an NFT to have these rights while still retaining usage and exploitation rights from the original creator.
Where can NFTs be sold?
NFTs can be sold on several markets, the most popular being OpenSea, BakerySwap, Rarible, SuperRare, Larva Labs, Magic Eden, Enjin Marketplace and KnownOrigin.
What does it take to buy an NFT?
To buy an NFT you need a crypto wallet, and cryptocurrencies with which to buy it. Cryptocurrencies can be from different blockchains than the one the NFT is on.
How to know if an NFT is the original?
The way to know if you have an NFT is to see if it is related to and promoted by the artist , and check its history on the blockchain.
Can an NFT from one game work in another?
For an NFT from a video game to work in another game, the latter would have to actively support it. Normally, NFTs related to video games have a “hash”, which is a sequence of letters that, when interpreted by software, gives a specific result. In this case, a video game that wants to support it would have to make the hashes of the original NFTs compatible, but this requires technical support and the creator must want to support NFTs that were not originally created by them.
What happens if I use an NFT that is not mine?
No problem. For now, there has not been much progress in laws that protect the intellectual property of NFTs as such, as they are replicable digital files.
How do I view my NFTs?
You can view your NFTs in apps like MetaMask.
How much does it cost to make an NFT in OpenSea?
The platform charges a 2,5% commission if you sell an NFT through them, but there's no commission for creating one. Previously, they required you to use a smart contract so the original creator of each piece of work would receive royalties for every sale, but that's now optional.
What social networks allow NFTs?
The main social networks that support NFTs are Twitter (now known as X) and Instagram, as a way to attract enthusiastic users. You can set images from certain collections as your profile picture , which is framed in a special way; in the case of Twitter, this is a hexagon with rounded corners.
Who created Nfts?
Although the Ethereum blockchain had already existed for several years, and had the ERC-721 standard, John Watkinson and Matt Hall realized that they could create unique characters on the Ethereum blockchain and distribute them, known as Crpytopunks, and distribute them in 2017.
What is OpenSea?
It is the leading market for the sale of NFTs. It is where many artists put NFT projects, since putting them up for sale is free and they only charge a commission once it has been minted.
