What is NFT and how does it work?

To understand the basic guidelines of NFT technology and to point out that its acronym corresponds to the acronym ” Non-Fungible Token “for its name in English. For William Mougayar, author of the book ‘The business blockchain,’ the term “Token” in the digital economy refers to the “unit of value that an organization creates to direct its business model.” These units have digital transfer registration number codes that guarantee their owner’s complete authenticity. An NFT has no useful function beyond its treatment as a collectible item since you cannot interact with them, only transfer them, and unlike cryptocurrencies such as Bitcoin, they are not interchangeable with each other.

A non-fungible Token is irreplaceable.

To take it to the minimum, each NFT is the specific and individual representation of “something real or fictitious” with an encrypted certificate of authenticity and cannot be replaced. Unlike a bitcoin, for example, which can be exchanged for another bitcoin and you get exactly the same thing, a non-fungible token, i.e., a single image, video, or audio file, cannot be exchanged on its own. Therefore, it could only be replaced by a different unique image, video, or gif.

The latest currents are promoting a market derived from the video game industry that allows NFTs that provide certified elements unique to a certain title, such as a weapon or a special type of clothing, etc. Virtually any digital item can be converted into NFTs, although their greatest popularity today is around digital art that can be reproduced virtually.

This is the core concept of the technology behind Non-Fungible Tokens: a signature that turns any type of digital piece – video, photo, messages, audio files, etc. – into a non-fungible asset. Now, although NFTs are designed to be irreplaceable, the artist retains the copyright and reproduction of the physical format. For example, anyone can purchase a reprint of a photograph taken of any work of art, but there is only one person/entity in legal possession of the original image and its rights.

Under this concept, it is common to find virtual video game elements, such as unique weapons and avatars; Artworks; Music; audio files, collectible images; videos of iconic sports moments, and real tokenized assets that can range from real estate and luxury vehicles to watches and fashion items.

Also Read: What is the blockchain? how does the blockchain work?

Transactions are made through Blockchain.

Although it can be perceived in a somewhat confusing way, last year, NFT technology remained on the rise as one of the fastest-growing trends in the cryptocurrency segment. It has gone from moving around 250 million dollars in sales in 2020 to 389 million last year. And the trend continues to rise. This robust technological relationship between data and value in NFTs is made possible by a technology called Blockchain. It is a decentralized database famous for serving cryptocurrencies such as Bitcoin and Ethereum.

Blockchain is a shared and immutable ledger of Bitcoin blocks that allows you to track the receipt and delivery of information where all transactions are recorded in a public document. Given the decentralized nature of the Blockchain, the security margin of the information stored, also tamper-proof, fosters an ideal environment for the proliferation of the NFT market by leveraging many cryptocurrency mechanisms.

The other big question: How do they work?

Basically, any digital element that its owner considers necessary to attribute authorship can be linked to an NFT as a way to certify its character as an “original piece” with an eye on commercialization. That is, anyone can create an NFT or thousands. Practically everything in the digital environment can become one. Taking a photo in digital format is within reach of anyone with a mobile phone, and converting, for example, that JPEG file into a piece for the virtual market is simple. However, no matter how favored you appear in the image, this does not guarantee that once converted into an NFT item, it will have any market value.