What are NFTs and how do they work?

We’ll explain to you what NFTs are and how they work, so you can understand what’s behind the news, such as the news about the person paying 260,000 Euros for a rock drawing. You already have an article on Xataka that explains this more technically and fully, but at Xataka Fundamentals we’re going to try so everyone can understand the concept of how it works.

Therefore, we will try to move away from techniques to make the explanation as simple as possible. We will first tell you what non-expendable property is, as it is a vital concept in understanding NFTs. Next, we’ll continue to tell you what NFTs are, and we’ll also briefly touch on how they work.

Nft 1 gmspors

First, what is unspent property?

To begin to understand the concept of NFT, we must first know and understand that there are expendable and non-expendable assets in our legal system. Exchangeable goods are exchangeable goods that have a value according to their number, size or weight. And non-spendable goods are non-substitutable goods.

An example of expendable goods is money. If you have a 20 Euro bill, it’s a consumer good, it doesn’t depreciate and is exactly the same as you can easily replace it with another 20 Euro bill. Also, this ticket is consumed when you use it.

On the other hand, an example of a non-spendable good would be a work of art. If there is a tile in the house, it is not consumed when used and cannot be replaced by another tile. One work of art is not equivalent to another and therefore cannot simply be exchanged like a 20 euro note.

What are NFTs

NFT stands for Fungible Token, an unchangeable token. Tokens are units of value assigned to a business model, such as cryptocurrencies. And NFTs have a close relationship with cryptocurrencies, at least technologically, although they are opposite, because a Bitcoin is a tradable commodity and an NFT is a non-tradable commodity, but in essence, they are two sides of cryptocurrencies. As they are. technological currency.

For your understanding, we can think of cryptocurrencies as a store of value, something akin to gold. You can buy and sell gold, and as the number of buyers increases, the price goes up, and when the number of buyers decreases, it goes down. It is a behavior equal to that of cryptocurrencies.

But after all, gold is gold, and you can exchange one ingot for another without any problem. But there are other goods made of gold, they have a value but are unique and this fact makes the difference and gives them another value. Like value made with gold or a piece of art, NFTs are unique assets that cannot be exchanged or exchanged for another of the same value because no two NFTs are equivalent in the same way that no two tables are equal.

It’s incremental, like an NFT in Da Vinci’s Mona Lisa as a great piece of art. There is only one and it is in a particular art gallery. You can buy the original if you wish. A shopping facility can be purchased, but would be of other value. That’s exactly what NFT is, but digital.

For the better, like an NFT malfunctioning piece of art, exemplary Michelangelo’ David, there is only one and in the Accademia Gallery in Florence; If someone wants to have that David, they should buy him (for sale) or buy a school, in this case, he will talk about what he will give to the statue.

Added to some digital artifacts or drawings for these Ascending NFTs. What people actually give it is that you’re the people who pay 260,000 euros for a rock depiction about the price, according to the FT, which is at the center of popularity today.

How about NFTs?

NFTs work with blockchain or blockchain technology. It is the same technology as cryptocurrencies that run over a decentralized computer network, linked by blocks or nodes and secured using cryptography. Each block is linked to the previous block, along with date and transaction data, and is data change resistant by design.

NFTs are assigned a type of digital certificate of authenticity, which is a set of metadata that cannot be changed. Authenticity is guaranteed in this metadata, the initial value and any purchases or transactions made and their author are recorded.

This means that if you buy NFT tokenized digital content, you will always have proof of the initial value it had and how much you purchased. It’s like buying a painting and tracking where it goes.

In general, most “tokens” or NFTs are generally based on the standards of the Ethereum network and blockchain. Thanks to their use of a well-known and popular technology, it is easy to trade them for buying and selling using certain wallets that also work with Ethereum. But we are talking about unique work, so there is no active trading as in digital currencies.

Why do people buy NFT?

One of the conspicuous advantages of purchasing craftsmanship is it allows you monetarily to help specialists you like, and that is valid with NFTs (which are way trendier than, similar to, Telegram stickers). Purchasing a NFT additionally as a rule gets you some fundamental use freedoms, such as having the option to post the picture on the web or set it as your profile picture.

If NFTs can’t be bought and sold as easily as Bitcoin, then why do people buy and spend so much money on them? It’s simple, because they believe it will increase in value over time, and then they can sell it for more money. No one spends 260,000 Euros for a rock drawing because they like rock drawings, they can have it for free, but because the value of this particular drawing is an NFT.

Therefore, the idea is that if I buy an NFT for 100,000 Euros, I can sell it for more money in the future. It is a unique entity and should, in theory, give it a higher value because it is unique.

Jake Eloman

Hello there. I'm on the GMSPORS Editorial team and one of the SEO support staff. I am one of the GMSPORS employees in the preparation and research of many content.