nft คือ public registry of authenticity and ownership of digital assets, made through blockchain technology. It is the acronym for Non-Fungible Token, which means non-fungible token.
The name is strange to most people, so let’s explain it better.
In the cryptocurrency market, a “token” is the digital representation of a financial asset, that is, a good that can be traded on the market.
When inserted into a blockchain, the token assumes the role of a contract, guaranteeing ownership—to whoever owns that token—in the form of a digital asset protected by cryptography and existing only in a registry digital.
The term “fungible” refers to goods that can be replaced by others of the same type, without losing their original value.
A USD 100 bill, for example, is fungible, because it can be replaced by another bill of the same value. Therefore, a “non-fungible” good is one that cannot be replaced by another of equal value, since it is unique and exclusive.
Now, we can better understand what a non-fungible token is: a contract that guarantees the ownership and authenticity of a digital asset within a network of public records.
It is as if you bought the original Guernica painting by Pablo Picasso and you had the receipt for that purchase. The non-fungible token, it should be mentioned, would be the invoice, the record of the transaction, not Guernica itself. This record, therefore, indicates the place where the access to the original work is.
Therefore, when we talk about NFT, we are only talking about the registration of a digital asset. However, you will see that it is common to use the term NFT to refer to the production itself, such as a piece of art or an internet meme.
NFTs and Block chains
Blockchain is not a company, nor a product, nor simply a system: it is a data architecture concept that establishes a public record of transactions. It functions as a great accounting book of the transactions carried out between its members.
In blockchain there is no regulation or centralized intermediation, it is the network members themselves, in a decentralized manner, who analyze and validate the transactions. When approved, they are recorded in encrypted data blocks, which are chained together to create unique, immutable codes.
So, blockchain ensures the security and confidentiality of transactions through cryptography and decentralized network model. It may sound strange, but it is this concept that has been used in NFTs and cryptocurrency transactions and is being touted as the future of the financial market.
When a person sells an NFT, for example, the blockchain records that transaction, which is encrypted, with the digital signature of both parties. Members of the network then evaluate the sale to attest to its validity and the authenticity of the digital asset. If accepted, the transaction data makes up a block which, in turn, is chained to other blocks to ensure immutability.
NFTs and cryptocurrencies
NFTs and cryptocurrencies are part of the blockchain and this new universe of digital assets and transactions; they use encryption and are evaluated by the members of the network to certify their authenticity and guarantee the security of the transactions carried out with them.
There is a fundamental difference between these concepts: while NFTs are not fungible, cryptocurrencies are fungible, that is, they can be replaced by other assets of equal value, such as physical coins.
Therefore, cryptocurrencies are used to carry out transactions on the blockchain, including investment market transactions and the buying and selling of NFTs. Yes, if you want to buy an NFT, you must have money in cryptocurrencies like bitcoin or ether.
NFT and metaverse
The metaverse is the new virtual reality we can live in for decades to come. It is an immersive digital environment in which we will experience, through avatars, a large part of our lives:
- social relationships;
- Work meetings;
- meetings with friends;
- shopping in malls;
- And much more.
In this new reality, an independent and fully digital economy is created, based on blockchain, cryptocurrencies and, of course, NFTs.
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