what is a non-fungible token and what is it for?

NFT is the new password. Popularized in 2021 among cryptocurrency enthusiasts, non-fungible tokens are about to enter other industries, including video games. We tell you everything you need to know about this controversial technology.

Since the beginning of last year we have often heard of NFT. Regularly, celebrities invest colossal sums in what all too often are presented as plain JPG images representing computer-generated characters. For instance, famous rapper Eminem bought an NFT from the Bored Ape Yacht Club collection for the sum of $ 450,000.

Presented as simple images sold for a high price, NFTs can make you smile. Despite the strong media coverage of the phenomenon, many internet users are actually struggling to do so understand the interest of NFTs, and the underlying revolution that accompanies them and that prefigures the future of the Internet (the famous Web 3.0). We take stock of this abstract and thorny topic below.

What is an NFT (non-fungible token)?

NFT stands for “non fungible token”, or “non fungible token” in French. A thing is said to be fungible if it can “Be replaced by things of the same nature, of the same quality and of the same quantity”, explains the Larousse. Between fungible assets, we find the money. A one euro coin can be replaced by a one euro coin. Similarly, one Bitcoin can be exchanged for another Bitcoin.

NFT

A so-called non-fungible activity, on the other hand, cannot be replaced by another element. It’s unique. In the same way that a work by Leonardo Di Vinci, Monet or Picasso is unique, an NFT is unique. Its uniqueness is easily identifiable. Attention, we often speak of NFT to describe visual works (the famous JPG above), but it can also be a musical work, a film or a writing or the code of a computer element. For example, the first SMS in history was scanned as an NFT and sold to the highest bidder. The source code of the World Wide Web was also auctioned as an NFT along with the first page of Wikipedia.

NFTs also promise to be essential in the future metaverse. Non-fungible tokens can also allow the exchange of digital real estate in virtual spaces like Decentraland or The Sandbox. A piece of virtual land in the form of an NFT was also sold last year for $ 2.4 million.

To certify the uniqueness of an NFT, it must be digitized and registered on the blockchain. Currently, most of the non-fungible tokens are registered on the Ethereum blockchain. At the origin of most cryptocurrencies on the market, the blockchain is a decentralized ledger that keeps track of everything that goes into it. Unlike a more traditional database, the blockchain, or blockchain in French, is immutable, unalterable and inviolable.

When an NFT is created, all the data of a work will be digitized and inserted into the blockchain. A non-fungible token can they contain a great deal of information. The technologies also make it possible to combine a range of data, ranging from images to lines of code, including video. Once registered in the blockchain, the work will be accompanied by a digital certificate of authenticity. This certificate guarantees that the Internet user in his possession is indeed the one and only owner of an NFT.

Once digitized on the blockchain, the history of the work (purchases, resales, creation date, creator name, etc.) is recorded forever. This is why art auction houses, such as Christie’s or Sotheby’s, quickly appropriated the technology behind NFTs.

Where to buy NFT?

There are many platforms for buying and selling NFTs. Among the most popular sites there are OpenSea, Foundation, Ethernity or Rarible. Many cryptocurrency exchange platforms have also taken on NFTs by offering their users to buy or sell them through their interface. This is especially the case with the essential Binance, the service that allows you to trade cryptocurrencies.

As explained above, there are many platforms for creating an NFT. For simplicity we will focus on the method to follow on OpenSea, which is by far the most used platform in the industry. Before you start, make sure you have an Ethereum wallet like Metamask on hand. To open a wallet, simply install the Metamask app on your smartphone from the Play Store or the App Store. You can also install it as an extension on your Chrome web browser.

We explain how to create (“minter”) a non-fungible token in a few steps:

  • Go to the OpenSea website or download the app from the Play Store or App Store
  • Press the button Create at the top of the interface
  • Then select Metamask from the offered digital wallets
  • Once the wallet is connected, click My collections
  • Create a collection of works by clicking on Create
  • Once the collection is created, you will need to choose a logo for it by following the on-screen instructions
  • Finally, press add article.
  • Choose Add a new item
  • Authorize the connection with Metamask
  • Follow the instructions on the screen and drag the image into the frame provided for this purpose
  • Click on Create

Be careful, if you then want to sell your NFT, you will have to pay a small amount of money in cryptocurrency (Ether). To put your work up for sale, you must imperatively pay ethereum network fees. This amount can sometimes be quite high depending on network congestion.

Should you invest in an NFT?

Holders of a non-fungible token do not hesitate to present them as excellent investments. By speculating on the price of some flagship collections, some internet users manage to get rich, or at least make impressive profits in cryptocurrencies.

Banksy's fake NFT
Credit: Internet Archive

However, it should be borne in mind that making money with NFTs is not as easy as one would like to believe. In fact, the price of all digital works does not automatically increase. When investing in an NFT, you always take the risk of not getting back your initial stake. For one reason or another, the price of the property can go down and never go up again. This is true for NFTs, cryptocurrencies, stocks or real estate.

Why are NFTs so often arousing distrust, especially among gamers?

Many video game publishers have protested their interest in NFTs. More and more studios want to offer skins or items in the form of non-fungible tokens to their players. In December, Ubisoft also announced the launch of Quartz, a platform for the acquisition of NFT. This platform offers non-fungible tokens for use in the game Ghost Recon breaking point.

This initiative caused the anger of the players. In the face of criticism, Ubisoft was forced to remove the presentation video from its YouTube channel. Many gamers actually summarize NFTs with speculation and trading of digital works and believe that publishers are simply trying to get rich on their own shoulders. Also, some video game fans point fingers energy consumption colossal number of cryptocurrencies and blockchains that allow the exchange of NFTs. By adopting NFTs, they believe that publishers endanger the environment.

Under these conditions, they have a very weak view of the implementation of NFTs in their favorite video games. The ferocity of NFT critics has already made several companies in the sector change their minds. This is particularly the case with Discord. The popular messaging app for gamers has finally chosen not to add NFT support to its platform following protests from its user community. Despite everything, many companies, including Square Enix, continue to show their interest in technology.

Nonetheless, by mid-2022, the popularity of NFTs is clearly at half-boom. The numerous controversies they have sparked, coupled with the steep decline in cryptocurrencies for several weeks, have cooled investors. Result: NFT searches on Google plummet by 75%. The craze seems to have passed: Internet users are no longer interested in non-fungible tokens.

What hasn’t decreased, however, is the number of scams on the sales platforms. In July 2022, the amount accumulated by the pirates already amounted to 100 million euros, for this year alone.

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