What is NFT and how does it work?

all about the concept of non-fungible tokens NFTs, on what basis they are based and all the information and resources you need to create and sell .

NFTs or non-fungible tokens are the new craze that has hit the internet community lately, in a few months we have all been surprised by many artworks and videos that have been sold for thousands, hundreds of thousands and even millions of dollars, with no ownership rights or even royalty rights for their owners. .

Global news channels have panicked since EVERYDAYS: THE FIRST 5000 DAYS by Michael Joseph Winkelman, better known as Beeple, sold for $69 million, yes that's right, $69 million, making him the third richest artist alive today.

(non-fungible tokens)

NFTs: Non-fungible tokens sold in the millions

The word NFT does not have a clear equivalent in Arabic and not even an agreed translation, but we will express it as non-fungible tokens as a smart translation of the English equivalent Non-Fungible Token.

These codes are described as non-replaceable; That is, they are not characterized by the feature of symmetry, Fungibility, which suffers from being distinguished in a more “authentic” Arabic form or wording. These symbols are one of a kind that is not similar to any other symbol. They are exactly as experts say about them, such as the original Mona Lisa by Da Vinci, which is estimated at 850 million dollars, Or as a starry night with an estimated value of $80 million.

These irreplaceable tokens like plates are one of a kind, and you give them their value when you own them. But the difference is that you only have it in digital form on the blockchain, and other people can copy and use it like anything on the internet, and you also don't have real ownership rights to it or even usufruct rights, crazy right?

This madness is defended by the rich buyers who spend millions on these tokens; It is like art having a great value, whether it is a work of art or a snapshot of your favorite basketball hero, or even the first tweet on Twitter by Twitter inventor Jack Dorsey, which by the way sold for 2 million and 915 thousand dollars, the value of these things - in their opinion - in Own it and flaunt it.

You might strongly disagree with this and see that it's just throwing millions into nothing... especially when you know that if you buy, for example, a scene of a Dunk in the form of an NFT from the NBA, you will not retain the rights to it, meaning that if you use the clip for example in your YouTube video, it will deal With you, it is as if you have violated the property rights, even though you purchased this clip from them for thousands of dollars.

As for the term tokens, it represents the technical part of it. These tokens depend mainly on the encryption techniques of the blockchain that allow you to deal with them as if they are encrypted assets owned by one of you, and you can make sure that you own them through this encryption process We will talk about this part in more depth later.

The conclusion is that NFTs, or tokens that are not exchangeable; They are virtual assets owned by a person on the blockchain database, so that he owns a key or a code if it is entered, it is confirmed that this person is the original owner of it, but despite this - virtual ownership - and despite the amounts paid in it, the owner does not have the right of ownership and use own, but when using it may receive a warning of intellectual property infringement.

Blockchain and NFT: the backbone of irreplaceable tokens

To understand how NFTs work, we need to understand Blockchain technology, and to understand Blockchain we have to understand what is meant by encryption or Encryption, so we will start with it. Very difficult, a technique frequently used on the Internet to maintain privacy.

For example, the WhatsApp application that we use is an example of End to End Encryption, that is, the messages that you send are encrypted, and they are not decrypted until they reach the person you are messaging, and so then he can read the messages, and this process ensures that if anyone can Somehow he gets to intercept this message and he can't read it because he can't decrypt it.

The encryption process for this reason is two-way; That is, it is reversible, but what if there is another technology that does something like this, but only in one direction and is not reversible. Wouldn't it be a little safer to use it to protect your property and prove that you own it?

It would certainly fit, well fortunately they do exist and they are called hashing algorithms, which are used in the blockchain and in non-fungible tokens.

These hashing algorithms are able to convert data into a specific array of entered numbers and characters, so that if one character of the entered data is changed, the entire array changes. This process takes place in one direction; That is, it is almost impossible to reverse, because even if you own the array, you will never be able to generate the data entered.

These algorithms are used in the Blockchain to ensure that the owner of the assets or coins is actually the one who is transferring them. As we talked about in the cryptocurrency wallets article; Each wallet has a private key and a public key that is extracted using hashing technology.

And this public key you can give to anyone to transfer money to you, while your private key is secret because it is the only way that you can complete your transfers, and that confirms to the blockchain that you own the currencies that you are transferring, and this transfer is allowed.

After doing this, this ownership is recorded on the blockchain, and that is what matters to us in making non-replaceable tokens, which through the blockchain contains a confirmed record that cannot be falsified for who is the owner of these tokens, their maker and the date of their transfer, the blockchain in general can be It is likened to a large Excel file that saves transfers between individuals and certifies their validity.

Now we can talk about a token or token, which is very similar to cryptocurrency such as Bitcoin and Ethereum, but it needs a blockchain platform and does not have a special platform like digital currencies, and in general, most non-fungible tokens depend on the Ethereum platform and smart contracts that is done.

Various origins of non-fungible tokens

You might be surprised, but this picture above sold for $69 million this year in NFT form, and there are many more that sell in fantastic numbers, and you might think that NFTs are only for boards, but that's not true, non-fungible tokens are more flexible assets than you think.

You can buy and sell music as a non-fungible symbol, and deal with it as you would deal with paintings, pictures and artwork, but you can also use texts in the same way, and sell them on many popular platforms.

The world of NFTs knows no bounds, whether price frenzy or crazy creativity, there are non-fungible tokens that come in the form of video games, designs for virtual reality and augmented reality, and who knows there may be more exotic examples of assets that can be virtualized in the form of NFTs.

Investors treat these pieces that they buy as an investment like any investment in real estate or gold, and use them in order to preserve their wealth, and to ensure that their value increases over time so that they can sell them later to get the profits that exceed what they paid in it.

How to create and sell NFT?

Although it seems a little complicated, and a person needs to be a computer scientist or a specialist in the Blockchain, it is quite the opposite. Making non-replaceable tokens is easy and clear and can be summarized in four steps:
  1. Opening an Ethereum-enabled wallet.
  2. Buy some Ethereum to pay business expenses and offer non-fungible tokens.
  3. Connect your Ethereum wallet to the platform for selling non-fungible tokens.
  4. Generate and display non-fungible tokens on the platform.

Step 1: Open an Ethereum-enabled wallet

The first step will be to open an Ethereum-supported wallet to pay the costs of making NFTs in addition to receiving funds on them. You can choose from any type of wallet, but usually specialists choose mobile wallets, such as: Coinbase or Rainbow.

Step Two: Buy Some Ethereum to Pay Business Expenses and Offer Non-fungible Tokens:

You will need to buy some Ethereum, and the best way to do this is to specify that for example you will buy with $100, the method varies depending on the wallet you use, you can buy Ethereum directly from the Rainbow wallet while you need to buy it from an external platform if you use a Coinbase wallet.

Step Three: Connect Your Ethereum Wallet to the Non-fungible Token Vending Platform

In this step you will connect your wallet to the platform you have chosen knowing that there are many platforms, and you will choose the method of delivery depending on the type of wallet you are using, but often you will only scan the QR code from your mobile wallet.

As for the platforms for non-replaceable tokens, there are many of them, but I will mention only the most popular among them:

1. Rarible platform

The Rarible platform is one of the most famous platforms for selling non-fungible tokens, and it is also a favorite of many because of its ease of handling, and its users like to upload NFTs to it by uploading photos on Instagram or videos on YouTube because of the ease.

2. SuperRare . platform

SuperRare is one of the very special platforms for dealing with irreplaceable tokens, it specializes only in paintings and artwork, so getting into it is like a fun trip to a museum or an artist's workshop.

3. Nifty Gateway platform

The Nifty Gateway platform is very similar to the SuperRare platform, but it specializes beside paintings and artwork in music, and it tries to provide a kind of high-quality icons, and one of its advantages is that it allows you to purchase through credit cards directly.

4. OpenSea platform

The OpenSea platform is one of the first platforms for non-fungible tokens, which allows buying and selling of various types of NFTs assets.

5. Zora . platform

The Zora platform allows you to create NFTs from text and writing, not just the usual shapes like paintings, images, and videos.

Step Four: Create and display the non-replaceable tokens on the platform

This is the most important step that depends on you, in which you will create your token, which you want to sell and convert it to NFT, and then you will display it on the platform and choose the starting bid price on it and display it on the platform. Despite this, you have to take into account the costs of this transfer as It will cost you between $70 and $160 depending on the platform.

You also have to calculate the commission for the platform you will sell on and the withdrawal fees, which is why the expenses may be more than the selling price of your piece, and you should think carefully before you think about making and selling a non-fungible token.

Do non-replaceable tokens bubble?

Many economists object that this growing obsession with non-fungible tokens (NFTs) is just a bubble, and soon these tokens will die off, or at least they will be valued at more realistic prices than the inflation we are witnessing.

There are also a number of NFT artists who think so. Michael Winkelman, the artist for the $69 million painting, said he honestly thinks it might be a bubble and it's going to end soon.

Specialists tell us that the issue of non-fungible tokens being just a bubble returns to its nature, whether it's paintings, videos or music, it does not include ownership rights or rights to use them.

It is just a link to your ownership history of it, which confirms that you now own it on the blocks of the blockchain as it tells us about the original artist who made it, who bought it and sold it to… until it reaches its current owner.

Recently, we are witnessing a partial bursting of this bubble. According to CNN, the average price of a single non-fungible token on April 5th was only $1,256, while it was just under two months ago, in late February, it was around $4,000 per token.

Which is a huge fluctuation right now, so will we see this bubble bursting soon or will the non-fungible tokens have a say?

Environmental objections to NFT?

The risk of NFTs being a bubble or not is the most prominent objection on the scene, but there is also a very strong objection that they are destructive to the environment, as the process of making non-fungible tokens requires as much electricity as mining Bitcoin or Ethereum.

Of course, a large part of the world's electricity comes from burning fossil fuels, which causes increased levels of carbon dioxide in the atmosphere, which leads to very large environmental damage.

Do not underestimate this damage, as Bitcoin mining alone requires the same amount of energy annually as a large and developed country like Switzerland with its population of about nine million people.

This is the reason why Tesla reversed its decision to allow the purchase of its cars using Bitcoin in order not to cause more destruction to the environment ... especially after the environmental disasters that affected the world in the past few years.

Nobody knows exactly how much energy the non-fungible tokens need, but we do know that the Ethereum they depend on needs 26.5 TWh annually, which is equivalent to the consumption of a large country like Ireland with a population of about 5 million people, which poses a huge risk to the The environment and the expansion of its use may do more and more harm to our blue planet.