The definition of NFT is “non-fungible token”, or a file that is not consumed by its use or transfer. The acronym NFT (Non Fungible Token) was very popular several months ago. Mainly, high-caliber artists and all kinds of entertainment companies such as the NBA, WWE or Warner Bros have entered the market. NFT fever.
Its popularity was quick and fleeting. They started to have a huge follow-up rally at the beginning of the year, but shortly a few months later interest dropped. Do youWhat the NFTs offer? What are NFTs? What are the benefits of NFTs? In this article we will try to explain it in a simple way.
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Table of Contents
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 of NFTs is that they are a document of authenticity and ownership of an online archive. Or at least that's one of its biggest uses. With this, many uses would be derived, such as unique clothes through augmented reality, card games, the creation of virtual art galleries, or an archive that unlocks numerous unlockables in different games. having a single file installed or accessible through a wallet.
What is an example NFT?
Let's say we want to make an exclusive NFT for Hardwaresfera users. And we want to use our logo. We take the logo that is 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 is very difficult to say since legality has not been updated to new technologies. If you have an NFT of a digital photograph, the NFT says that you own the NFT. It does not 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 that is owned 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.
Said in a simple way. You can have an official Louvre NFT of Leonardo da Vinci's Mona Lisa, but that doesn't mean you are the legal owner of Leonardo da Vinci's Mona Lisa in the Louvre. For legal purposes, it may be from the file itself that the Louvre hosts on a server for the NFT image, and to which it refers in the NFT. That file would not be unique to you, because NFTs link to files, in the vast majority of cases. The legality in this regard has few precedents and it is a possession file backed mostly by the blockchain chain in which it is 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.
With this you run the risk that if the original file disappears, your NFT is unusable. This has happened when some files were deleted from the servers that hosted them, either by manual deletion or because they were hosted on free-to-use servers and replaced.
What are NFTs and how to make money?
Whether you are a creative professional, an amateur or an investor, if you make the right decisions, you can make money with NFTs. It is not easy and there is no clear indicated path. You will need an Ethereum wallet or any blockchain with smart contracts that allows NFTs, spend money on tokens to put the contracts into. It is imperative to understand the basics of investing and its unwritten rules, the first of which being that You should not invest money that you cannot afford to lose. because you must bear in mind that you can lose everything.
You have to take into account the activity of the market, the costs of minting, transfers... There are many costs that go beyond putting money and negotiating. There are cases of professional artists who have managed to make money with NFTs, but are just a few success stories compared to so many others who don't. Many others have risked and have not achieved sufficient sales to pay for the costs of the tokens in which they have invested, and it is the most common.
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 made about NFTs. The first is its electrical consumption, boosted above all by the abuse of the Ethereum blockchain at a time when it was Proof of Work, 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 try to make it fall the pay to earn model, that is, playing to get objects to sell. First, that turns playing video games into a job. Second, there are already examples of this, and they are models highly dependent on people being interested in buying these digital objects at the price, and anyone who has sold boxes of Counter Strike: Global Offensive or Steam trading cards knows that over time , these digital products become devalued because over time there are no longer people interested in those digital products.
Finally, they try to put them up without giving substantial benefits to users. It is feared that as they arrive metaverses the use of NFTs is imposed as the only way to have custom content like clothes and avatars. Wanting to monetize things that are normally free and that nothing is really shared or public possession, the latter being something that the Internet has grown into.
The rise and fall of crypto art
First steps and promises
2021 has been the year of the NFT, but this technology has been around since contracts could be added to the Ethereum blockchain. At the end of 2020, professional artists who accepted payments in cryptocurrencies began to emerge, and shortly after they went on to sell the so-called crypto art, name with which you want to normalize the NFT. But not all NFTs are crypto art, as they can be text writings or legal contracts.
The idea of crypto art for creative professionals was to limit the possession of digital files in order to make a limited run of their own works. In this way it is done the digital equivalent of an official print run, like the ones artists like Keith Haring made 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 is also that of high energy consumption the Ethereum blockchain in all its operations. There have always been promises that once we move to XNUMX% renewable energy, the consumption problem would be eliminated, but there is still a long way to go before renewable and sustainable energy can supply all blockchain consumption. For this reason, many potential interested parties did not enter or left as soon as they saw the consumption or monetary costs. Ethereum jhas passed to Proof of Stake, as a way to secure their future in the technological world due to the possibilities that smart contracts can offer.
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 make money with NFTs, but the market began to devalue rapidly. Interest in what NFT technology offered was lost. Its current possibilities were already present, such as being a file verification system such as airline tickets or concert tickets. The crypto art market was filled with the same problems that the traditional art market has.
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 reached very high prices in Ethereum compared to others, such as a work by Sakimichan that began with 5 ETH starting price. The price could be put on it because Sakimichan is well known and with hundreds of thousands of followers, with which she has a lot of recognition and therefore can ask for more upfront for one of his work. In addition, the fact that one of his works has been sold for a high price, would raise the price of the others immediately by potential interested parties.
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 real value, primarily for its resale value. But the reality is that its value is what you give yourself, and what someone else is willing to pay for it. In the end, the market has been crashed by investors looking for financial gain, not really wanting to support 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 more use cases that the NFT creators let you use. It is important to know if your purchase comes with commercial exploitation rights, since it is not common for an NFT to have it and continue to have rights of use and exploitation by 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 and promoted by the artist himself, 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 does charge you a 2,5% commission if you sell an NFT with them, but it does not charge you any commission when creating it. Before They forced you to put up a smart contract so that the original creator of each work would receive royalties for each sale, but that has become optional.
What social networks allow NFTs?
The majority social networks that allow NFTs are Twitter (now known as X), and Instagram, as a way to attract enthusiastic users. Can put the image of certain collections as a profile photo, to which they put a special-shaped frame, being a hexagon with rounded corners in the case of Twitter.
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.
