Economy – What are NFTs, which affect the world of culture?

  • 1 What is an NFT?
  • The name NFT is the acronym of the English “Non-Fungible Token”, or in French “non-fungible token”, that is, it cannot be exchanged for an equivalent (for example a 5 euro note exchanged for another 5 euro banknote) . An NFT is a “digital object” whose ownership is traceable. Specifically, it is a contract, the rules of which are defined by a computer code, based on a virtual or real object.

    These rules can limit the number of copies available for sale, authorize a “reissue” or set up a royalty system that allows the original author of a work to be remunerated during each transaction. It is a new type of digital asset, such as cryptocurrencies such as Bitcoin, which uses blockchain technology, which is a shared authentication directory between a multitude of individuals without central authority.

  • 2 Who buys them?
  • Especially collectors, or speculators who hope to be able to sell them later with a capital gain. The NFTs were then the subject of several high-profile auctions, such as the sale of the Twitter CEO’s first tweet for $ 2.9 million.

    They are also used in video games, in cinema, in music but are also the subject of more original initiatives, such as the purchase of virtual land or the breeding of virtual racehorses.

  • 3 How does it work?
  • As with cryptocurrencies, it is possible to buy and sell NFTs on specialized platforms. During a transaction, the NFT-designated object is not necessarily delivered. Only a certificate of authenticity stored in the blockchain changes ownership.

    To maintain the rights to this certificate, a digital wallet is essential, whether it is software in the form of an Internet browser extension or a connected object protected in the form of a USB key. Before the purchase he must be provided with a cryptocurrency but it is also possible to “create” an NFT by yourself, with some computer knowledge.

  • 4 What are the risks?
  • Buying, selling and using an NFT today remains a technical and sometimes misunderstood operation that can put investors at risk. For each interaction with the blockchain, a fee is required to remunerate the people responsible for verifying the transactions.

    As a recent report from the specialist platform Chainalysis explains, “Buying newly created NFTs from a highly anticipated collection is an extremely competitive process, with thousands of users hoping to purchase at the same time.” In this case, many transactions fail, but the fees remain due and are sometimes high, depending on the price of the cryptocurrencies often used to pay for them.

    Some buyers are determined to be successful and may use robots, which makes the transaction even more uncertain for a novice investor. “The data suggests that NFTs are far from a foolproof investment,” Chainalysis further points out, explaining that NFT collections are often sold at a better price to the enthusiasts who helped promote the project.

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