The name NFT is an abbreviation of the English “Non-Fungible Token”, or a “non-fungible token” in French, that is, one that cannot be equivalently exchanged (for example, a 5 euro ticket is exchanged for another 5 euro note). An NFT is a “digital object” whose property is identifiable. Specifically, it is a contract, whose rules are defined by computer code, based on a virtual or real object.
These rules may limit the number of copies available for sale, authorize a “re-edition”, or organize a system of royalties to remunerate the original author of a work at each transaction. It is a new type of digital asset, such as cryptocurrencies like Bitcoin, that uses blockchain technology, namely an authentication directory shared among many individuals without a central authority.
Especially collectors, or speculators hoping to be able to resell them later with a capital gain. NFTs have therefore been the subject of several high-profile auctions, such as the sale of Twitter’s CEO’s first tweet for $2.9 million.
They are also used in video games, movies, music, but also for more original ventures, such as buying virtual land or breeding virtual race horses.
As with cryptocurrencies, it is possible to buy and sell NFTs on specialized platforms. During a transaction, the object designated by the NFT is not necessarily delivered. Only a certificate of authenticity stored on the blockchain changes ownership.
In order to retain these credential rights, a digital wallet is essential, be it software in the form of an Internet browser extension or a secure connected object in the form of a USB key. Before buying, it must provide a cryptocurrency but it is also possible to “create” an NFT yourself with some computer knowledge.
Buying, selling and using NFTs today is a technical and sometimes misunderstood task, which can put investors at risk. For each interaction with the blockchain, a fee is required to remunerate those responsible for verifying the transaction.
“Purchasing newly minted NFTs from a highly anticipated collection is an intensely competitive process, with thousands of users expecting to buy at the same time,” explained a recent report by specialist platform Chainanalysis. In this case, many transactions are not successful, but fees remain outstanding and are sometimes high, depending on the value of the cryptocurrencies that are often used to pay them.
Some buyers are determined to succeed and may use robots (powerful software to place orders, editor’s note), which makes the operation more uncertain for a novice investor. “The data suggests that NFTs are far from a foolproof investment,” Chainanalysis further notes, explaining that NFT collections are often sold at better prices to enthusiasts who helped promote the project.