Technology: Highlighted by several record sales at the beginning of the year, the NFT technology, which stands for “non-fungible token“, is now under the spotlight. Explanations on a not so new phenomenon.
Non-fungible token: behind this rather barbaric term hides a blockchain feature that has been earning thousands (or even millions) of dollars for some artists for some time. Enough to whet the public’s curiosity in recent weeks, which in turn leads to a sudden popularity of these somewhat peculiar crypto actives. If they have obvious applications in the world of art and culture, the idea is now applied in various fields, from video games to the sports sector.
What is NFT?
NFT is the abbreviation of the English term “Non-Fungible Token” (or nifties). A token is a digital asset issued by a blockchain. Bitcoins (a well-known cryptocurrency), the ether of the Ethereum blockchain, or the XRP of the Ripple blockchain are all tokens. One of the specificities of these tokens is their fungibility: this term refers to the fact that one bitcoin is equivalent to another bitcoin and that, in principle, nothing distinguishes them from each other. This is a characteristic of the currency and one of the arguments put forward by those who consider crypto currencies to be quite comparable to conventional money.
But this is not a requirement: a blockchain can quite possibly issue non-fungible tokens, i.e. digital assets each with unique characteristics, and which therefore cannot be exchanged for each other. The NFT thus offers a non-fungible token with a specific cryptographic layer based on an ERC (Ethereum Request for Comment) blockchain. Thanks to this unique encryption and the included metadata, the token can then serve as an identification certificate for any digital object (a work of art, a tweet, a video game object, etc.).
Is the NFT a novelty?
Not exactly. The concept of non-fungible tokens first appeared on an experimental basis in 2015, with the Etheria project. This one proposed to users to acquire a parcel of a virtual world, the characteristics of each parcel of the map being stored on the Ethereum blockchain. This first experimental project at the time laid the foundations of NFT, using the blockchain to record ownership of virtual objects and transfers of ownership between different users.
If the Etheria project served as a first proof of concept, it would be two years before seeing the emergence of NFT in its modern form, carried by two projects: the Cryptopunks project, and the CryptoKitties project. Crypto kitties were the first NFT project that was very successful at the time: it offered users to collect virtual kittens, each kitten being represented by a non-fungible token containing its various characteristics. The success of the project, developed by the studio Dapper Labs, caused congestion on the Ethereum blockchain in December 2017 and prompted the project’s founders to develop another dedicated blockchain.
Buoyed by these early successes, the creators of Crypto kitties proposed a new token standard, ERC-721, which defines the main characteristics of this new kind of token: non-fungible and indivisible. This standard, based on the Ethereum blockchain, was quickly adapted by other players, who proposed their own versions based on different blockchains according to their needs. And a whole market has seized on these tools to develop their own NFT applications over the last four years.
Why is everyone talking about it?
The answer is short: because there is a way to make money.
The digital art market sees the use of these non-fungible tokens to solve the thorny issue of art in the digital age, by automatically replacing the precious certificate of authenticity of an artwork.
Artist Mike Winkelmann saw one of his digital works sold for $69.3 million (in cryptocurrency) at a Christie’s auction in early March. But at that price, buyers don’t walk away with just a USB stick containing a copy of the work in question: instead, it’s the unique token corresponding to that work, and certifying that its owner is indeed the legitimate owner of the work.
But that’s not all, in fact Jack Dorsey the CEO of the community network Twitter has put up for sale his very first Tweet, in an auction where the amounts approach 2 million euros. In the same idea, the Canadian musician Grimes (also Elon Musk’s companion, both as whimsical as each other) has put some of his digital productions for sale online, which have reached 6 million.
Several specialized platforms have opened in recent years to exploit this source of income: they offer artists the opportunity to put their virtual works online and generate a non-fungible token corresponding to the work in question. This token can then be bought by interested parties, resold, given away and can give rise to speculation. It can even be stolen from you, like any digital asset, and resold at low prices to unscrupulous buyers.
In addition to artists, many industries see this technology as an opportunity: the video game industry did not wait for the emergence of the NFT to trade in virtual objects, but the use of a blockchain eliminates the central role of the game publisher in virtual object transactions. In sports, the NBA also decided to offer a digitized version of its trading cards by launching an NFT platform, developed in partnership with Dapper Labs, which offers a virtual equivalent of its trading cards in the form of non-fungible tokens. The deal is said to have brought in nearly $240 million in revenue in 30 days, with the publishers and the NBA getting paid through commissions on transactions and the publishing of new cards.
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