NFT (Non-Fungible Token). In an age of acronyms, it’s becoming difficult to keep track of all the new acronyms that burst into our daily lives. For every acronym that hits the headlines, thousands of other acronyms remain confined to the semi-anonymity of their niche. NFT, however, is in serious danger of becoming one of the most talked-about acronyms of the coming years.
Blockchain, Bitcoin, cryptocurrencies
If you think you’re phenomenal just because you know something vague about how Blockchain and the whole cryptocurrency world works, you’re already behind. In fact, the topic on the lips of all digital and investment experts – and not only – is the outbreak of Non Fungible Tokens. Before you risk someone calling you a boomer for comparing a Bitcoin to a Netflix prepaid card bought at the cash register at Supermarket, it’s best to get your facts straight and clarify some basic concepts.
First, the Blockchain. Without this technology, we wouldn’t even be here talking about certain topics. In fact, you just need to know that it is a kind of digital guarantee for any kind of authority or regulatory body. Given its immutability, it cannot be counterfeited. It is therefore used, for example, to certify production chains, validate official documents or confirm and record financial transactions.
Here we come to Bitcoin. The Blockchain was created to be the ledger of transactions made with the world’s best-known cryptocurrency. Due to the (highly) variable value of cryptocurrencies, the interest in this digital currency has been increasing every time someone has talked about making a lot of money with it. The truth is that the level of risk is quietly comparable to gambling. But let’s stay on point.
NFT: Non-Fungible Token
Cryptocurrencies are considered fungible assets. This means they have an assigned value, are exchangeable and can be exchanged for an asset of equal value, exactly like money. NFTs, on the other hand, are non-fungible assets. This is where the matter starts to get interesting.
An NFT, technically, is nothing more than a digital file. It can be a photo, video, graphic, audio.
The peculiarity is that thanks to the Ethereum blockchain, another cryptocurrency superstar, these files are unique and not-replicable. I can see your puzzled faces. Perhaps an example can be more effective.
Let’s say an artist creates a painting. If he did so by painting a canvas, it would automatically become a unique piece and take on a value based on several parameters, including its uniqueness. If the same artist created his work digitally, it would be replicable and, clearly, its value would be significantly lower. But if the same work was created digitally as an NFT: BINGO!
Are you beginning to understand how NFTs work?
The enormous attention to this phenomenon, which has literally exploded in recent months, is due to the economic implications in areas such as art, music, collecting. Wherever there’s a possibility of a lot of money, there is also the possibility of making good investments.
If, therefore, on the one hand, there are artists and creators who see a new frontier of monetization of their works; on the other hand, there are those who are already hunting for potentially millionaire deals. If today we were to buy, for example, an NFT of a relatively unknown YouTuber (for example, a selfie of him), we could pay something like a dozen of euros. If in a few years, the same YouTuber would become an actor, the new Al Pacino, that selfie would probably be worth a hundred times more.
The NBA among the first to invest in NFTs
Just to give you an idea, a LeBron James dunk was recently sold for more than $200,000.
Not even that much when compared to the nearly $2 million for which a Michael Jordan autographed card was sold. Still cheap if you consider that a work by Grimes, Elon Musk’s girlfriend, went for $6 million. We could go on citing dozens of other similar cases.
If all this seems meaningless to you, it’s because you don’t consider the psychology behind it. After all, it’s just a digital version of what normally makes collectors of anything spend astronomical amounts of money. So don’t be surprised when you happen to see NFT display frames in some downtown store or for sale on Amazon. Potentially crazy, but it also has its downsides.