Updated: Jun 18, 2022
By Rafael Pérez Vicente
May 31 2022,
UPDATED 12:00 PM EST
Without a doubt, The Monalisa is one of the most famous pieces of art on Earth in the XXI century. Its value rises well over 930 million dollars; and its prestige is given not only by the art´s quality but also by its history, antiqueness, and popularity. With this taken into consideration, it may be stated that the value of NFTs does not rely on their quality, but rather, on their history and uniqueness.
But, What´s an NFT?
NFTs or Non-Fungible Tokens are digital assets representing the property of a piece of art, music, or other digital good within the network. These pieces of information are usually bought and sold with cryptocurrency within a network called Ethereum, which is a blockchain digital platform where information is stored about everyone´s wallets and crypto balance.
Within this article, we´ll not get into the details of what is blockchain and Ethereum, however, in simple terms, blockchain is the way in which the Ethereum network is structured. This technology allows the network to be decentralized from a server, avoiding any type of hacking or breach of sensitive data. Whereas Ethereum is a community-based technology that serves the purpose of an intermediary within the parties of a transaction inside the digital web. Hence, Ethereum allows the users to send and recieve cryptocurrencies and different assets into their wallets for small commissions called gas.
Talking about NFTs, their potential is only starting to rise. The words “Non-fungible” make reference to the fact that these digital assets are unique within their boundaries. Take for example a picture of an apple taken by a hypothetical artist called John. John will be able to upload this picture to his digital wallet as a Non-fungible token through different methods and become the “official owner”. While it may be downloaded and replicated by different people, John is still the individual owning the picture. Additionally, if John wanted to sell his picture,
he could easily upload it to the market and transfer the property to another individual´s wallet without the need for an intermediary (other than Ethereum) to make the transaction. Having said that, it may be understood that Non-fungible tokens are opportunities for digital artists to sell their art, videogames to release unique skins or collectibles, or even transfer important documents such as real state property contracts, school diplomas, etc.
An interesting example of the rise of NFTs can be seen in the case of CryptoPunks. These are 10,000 uniquely generated characters at sale in the Ethereum blockchain. Initially, these 10,000 characters were offered for free within the marketplace, however, nowadays they are expensively traded between individuals in the digital market for their uniqueness and history. The highest offer on a Cryptopunk was 23.7 million dollars and their exclusiveness relies on the fact that no two of them are alike, and the most expensive characters have less common characteristics with the others.
[Photo Credit: arvalabs]
Having understood the theory behind NFTs, it may be stated that their success relies on the basic principles of every market, offer and demand. NFTs have emerged in a market similar to physical art, the wine industry, or other collectible items. However, the difference between these industries and NFTs is that this last one is created to be completely automated and allows the movement of large volumes of money between countries. Nevertheless, NFTs are still a growing industry that will continue to develop in the foreseeable future.
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