What are NFTs, these digital certificates that can be worth a fortune?

Do you dream of buying a tweet from one of your idols, owning a piece of a digitized mural, collecting or reselling football player cards online, virtual objects in a metaverse, or gaining access permanent free at concerts?

NFT technology (non-interchangeable tokens in French, editor’s note) is certainly made for you. Indeed, thanks to this technology – based on cryptocurrency “smart contracts” – you can obtain a tamper-proof certificate of your purchase, a kind of digital title deed that attests to the uniqueness of your property.

At first sight all of this may seem a little obscure or without great significance. But the “NFT revolution” is nevertheless underway according to many specialists in the field. These certificates explode the sectors of digital art, next-gen video games and potentially many others to come. A short guided tour in the strange and cryptographic world of NFTs.

Buy, collect, resell, speculate

American artist “Beeple” (Mike Winkelmann) sold a digital photo named “Everyday: the first five thousand days” for more than 69 million dollars by the auction house Christie’s in New York. This digital photo in NFT can however be consulted and downloaded by all Internet users who wish to do so. This is not the case with a table of master kept preciously out of sight, in the physical world.

But why did the buyer of this image pay such a sum? Not for the value of Beeple’s digital work as such, but because it was sold with his NFT. The NFT makes it unique and traceable. Its digital certificate indicates that it is indeed the original work of the artist. It also indicates who sold it, who bought it, for how much and when.

The NFT is for me the trojan horse of the blockchain in the physical world and it will spread little by little in all sectors.John Karp, author of “NFT revolution, birth of the Crypto-Art movement”

This digital collage by the American artist certified by NFT can therefore now be sold in another auction, with everyone being able to check (most often on the Ethereum blockchain, see box below) its authenticity and its journey.

In addition, if the value of the cryptocurrency that made it possible to acquire the NFT certificate of this image increases, the value of this image will increase for the owner of the NFT.

A 10% rise in the Ethereum cryptocurrency and the acquirer of “Everyday: the first five thousand days” will see his digital work go from 69 million dollars to more than …76 million.

The technical operation of NFTs in a nutshell

NFT stands for “Non fungible token”. the principle of “tokens” is linked to that of blockchains, decentralized computer protocols allowing to encrypt and secure financial transactions through the Internet network. The The most important blockchain is that of Bitcoin (BTC). A token in a blockchain allows toattest to the validity of a transaction. It is tamper-proof.

NFTs mainly use the second largest blockchain (after that of Bitcoin), named Ethereum (ETH). This blockchain Ethereum contains a cryptocurrency, like Bictoin, but it allows in addition of manage “smart contracts”, what the BTC blockchain cannot do. Even though systems via interposed platforms make it possible to buy NFTs with Bitcoin. The NFT are therefore technically “smart contracts”, created in their vast majority by the Ethereum blockchain (which is also a cryptocurrency).

Everyone is getting into NFTs

Since this year, the total value of sales of “virtual object certificates” – the famous NFTs – has increased tenfold compared to 2020. It reached 2 billion dollars in the third quarter of 2021.

Twitter CEO Jack Dorsey, for example, sold his “first-ever tweet” as an NFT for $2.9 million in March this year. A pixelated avatar was sold for more than $5 million on the CryptoPunk platform, one of the first NFT platforms.

But beyond these auctions at astronomical prices, a whole consumer NFT market is emerging.

NFTs allow more and more creators to make a living from their art. The main reason is that the number of collectors has multiplied.John Karp, author of “NFT revololution, birth of the Crypto-Art movement”

This is what makes John Karp, author of “NFT revolution, birth of the Crypto-Art movement”, say that “NFTs seem set to become essential in the future“. The specialist sees in it the passage from a purely virtual economy, that of cryptocurrencies, to the physical world, or at least to the real economy. “The NFT is for me the trojan horse of the blockchain in the physical world and it will spread little by little in almost all sectors“says John Karp

NFTs can actually be linked to real objects like a Dom Pérignon champagne bottle “dressed” by Lady Gaga. This bottle is sold in NFT which establishes a property on the physical bottle as well as its “digital clone”, in 3D.

The fashion world is diving into the NFT, there are already luxury virtual clothes for example, which can only be worn on Instagram, with a filter system“, explains the author of “NFT revolution”.

The principle of NFT is also developing – of course – in video games, often linked to a cryptocurrency. Axie Infinity and Sandbox are the most famous. The first offers to buy, raise and sell virtual creatures in NFT. The second is a “metavers” where players evolve characters in a virtual world. The Sandbox game consists of building, creating objects, buying, selling, thanks to its cryptocurrency the SAND, which of course allows the management of virtual possessions by NFT.

The game The Sandbox, close to Minecraft, allows you to evolve a character in 3D universes where everything can be created, bought, sold with NFTs and a cryptocurrency, the SAND.

The four main characteristics of NFTs:

Transparency: The users NFT platforms can see all trades in a transaction explorer, as is the case with any blockchain (“chain of blocks”, computer protocol allowing cryptocurrency transactions).

Immutability: The Created NFTs cannot be copiedwhich therefore makes unique tokens linked to unique items.

Decentralization: No entity or natural person centralizes the exchanges, the control exchanges take place by algorithms of all participating machines, with no central authority.

Security : Created (mostly) by the Ethereum blockchainthem Non-interchangeable tokens are stored in secure databases scattered around the world. Of the checks are operated by all computers that participate in the blockchain.

Crypto-art and new economy?

John Karp believes that the NFT will usher in a new golden age for artistic creation. “First and foremost, NFTs allow more and more creators to make a living from their art. The main reason is that the number of collectors has multiplied“, explains the specialist. This new economy has been named crypto-art. It is defined as the alliance between the technologies offered by cryptocurrencies and art.

For the author of “NFT revolution”, crypto-art offers the possibility for artists to get out of dependence on online music platforms. “The fact that artists receive a tiny fraction of the income generated by listening to their works on streaming platforms is an inconsistency. The Internet creates a direct relationship between artists and their community, so there is normally no need for intermediaries. NFTs make it possible to find this direct relationship”, says John Karp.

It is the possibility of creating an economy within the economy that is offered by the NFT.John Karp, author of “NFT revolution, birth of the Crypto-Art movement”

So the crypto-art movement begins to “find their bearings and invent new processes“, according to the author. “The NFT materializes in many ways and its possibilities are limitless. The NFT is a title of ownership but it can also contain in addition, a title of use or access, associated with the actions of the artist.“And John Karp to give examples:”Booba made 25,000 NFTs last week which provide access to the associated video. The group Kings of Leon went further: with their NFT you can access all their concerts.

The author of “NFT revolution” believes that a real economic revolution is coming with the NFT. “An NFT giving access to the backstage (behind the scenes, editor’s note) could for example be resold later by its owner. It is the possibility of creating an economy within the economy that is offered by this technology.“, he concludes.

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