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Decoding NFT: Understanding and exploring the fascinating world of Non-Fungible Tokens 

NFTs, or non-fungible tokens, have quickly become one of the most exciting and disruptive trends in the crypto-asset and blockchain world. These unique digital assets are becoming increasingly popular with artists, content creators, celebrities, collectors and investors. What is an NFT? What are the practical uses of an NFT? How do NFTs work? All you need to know about non-fungible tokens in both the virtual and real worlds. 

 

Décryptage NFT

Summary

NFT: definition and explanation 

What does NFT stand for? 

NFT stands for Non-Fungible Tokens. In French, these are non-fungible tokens. The term “non-fungible” refers to a good or asset that cannot be exchanged for another in an equivalent manner. 

Are NFTs crypto-assets? 

NFTs are unique digital assets recorded on a blockchain, using cryptography and blockchain technology to operate. Among the most popular, tokens are issued via the ERC-721 or ERC-1155 standard on the Ethereum blockchain. They are therefore considered to be crypto-assets, like Bitcoin or Ethereum, but they are not cryptocurrencies. 

What exactly is an NFT? 

Unlike traditional digital assets such as the aforementioned giants, NFTs are not interchangeable at an equivalent rate. Each NFT is unique and has attributes that distinguish it from others. These attributes can include information about the origin, ownership and authenticity of a digital object, whether it’s a work of art, a video, a piece of music or even a tweet, and so on. 

How does non-fungibility work? 

To better understand the concept of non-fungibility, let’s talk about its opposite concept: fungibility, with bitcoin. On an exchange platform, whether you have one of the very first bitcoins created on the blockchain or you hold a bitcoin freshly mined by the cryptocurrency miners (crypto-asset or digital asset according to the term preferred by the ACPR), these two bitcoins have no difference and are interchangeable.  

So whether they are recent or very old, they have the same function and the same value. A non-fungible token, on the other hand, is just the opposite: it is unique, with its own characteristics. It is therefore a unit that is exchanged through blockchain technology, with its own utility and unique value, and cannot be replaced or imitated by another. 

What is the purpose of buying non-fungible tokens? 

NFTs can be classified by interest, although this list is not exhaustive. In fact, many projects are constantly being created, creating new use cases in the process. Here are some of the most common categories: 

The collections  

Collectibles are a range of collectible virtual objects. The best known are Cryptokitties, which created a huge buzz on the Ethereum blockchain in 2017. They each have atypical physical characteristics and can be connected together to create a new one. Some are rarer than others. The aim of collectibles is to have a complete and diverse collection. 

Metaverses 

On websites or in video games, metaverses are NFTs that make you the owner of a plot of land. The most famous metaverse games include Decentraland, SandBox and Axie Infinity.  

These are games in which you play as a character. You have adventures and build your virtual world. To edit and build on a plot, you need to own the NFT for that plot. As well as simply providing entertainment, some major companies have understood the value of buying these NFTs to add advertising to their metaverses. 

Trading card games 

These are cards that can be collected for online play. Each card is an NFT and allows the player to be the sole holder of it in order to play with it. The cards in these games generally represent characters, creatures, spells, objects or other elements, and are used to create strategies and play against other players. One of the best-known players is Gods Unchained, based on the Ethereum blockchain.  

Utilities 

Utility NFTs are non-fungible tokens that are associated with a specific utility or function beyond their simple artistic value. For example, access to events, conferences or exhibitions, certification of brand authenticity, digital diplomas or licences. 

The art  

NFTs have revolutionised the way artists and content creators monetise their work. Through the sale of NFTs, artists can build more direct relationships with their audiences and gain a fair share of future sales. NFTs also allow collectors to acquire exclusive digital objects and participate in online communities focused on art and culture. 

Some uses for NFT 

The very famous clothing brand Lacoste has launched a collection called UNDW3 containing 11212 NFT. Owning one of Lacoste’s NFTs offers many opportunities. For example, the brand creates and offers entirely exclusive clothing reserved for NFT holders. 

Second example with the king of coffee in the world, Starbucks. Last year, the company decided to completely rethink its customer loyalty system. So they thought up and created the Odyssey programme (which has been a great success). Customers can now complete missions, answer questionnaires and then collect travel stamps (in the form of NFTs). These stamps can then be resold or kept to be collected for further rewards. 

As the latest example, Burger King has launched a marketing campaign focusing on NFTs in September 2021. The company placed QR codes on around 6 million meal boxes. By scanning these QR codes, an NFT was automatically unlocked, which then led to rewards. 

Buying and investing in an NFT project 

The quest for ownership and scarcity 

The purchase of NFTs, or non-fungible tokens, involves the acquisition of unique and verifiable digital assets using crypto-assets such as Ethereum. It also involves using a dedicated online platform where NFTs are created, sold and traded. The main attraction lies in rarity and digital ownership, often associated with works of art, virtual items or other digital assets.  

How much is 1 NFT worth?  

The value of an NFT (non-fungible token) varies significantly based on a number of unique characteristics that are influenced by the NFT market. These characteristics include buyer demand for the digital asset or the work it represents, the reputation of the artist or creator, the rarity of the work and market conditions at the time of trading. 

To find out the current value of a specific NFT, check recent transactions on platforms such as OpenSea, Rarible, etc., or consult sites specialising in tracking NFT sales.  

NFT prices are extremely volatile, as they are influenced by fluctuations in the crypto-asset market and changing buyer preferences. Before taking part in the ever-changing NFT market, carry out thorough research or take advice from experts in the field to understand current trends and risks. 

For example 

“Everydays: The First 5000 Days” by the American artist Beeple, is a work of digital art sold as an NFT at auction for 69.3 million dollars at Christie’s, after a starting bid of 100 dollars. The work is a collage of 5,000 vector images created by Winkelmann for his “Everydays” series.  

Other famous tokens include the Bored Ape yacht Club (BAYC) monkeys and CryptoPunks, which have been sold at prices ranging from a few thousand to several million dollars, depending on their rarity and attractiveness to buyers. 

Tips for investing in a volatile market 

Investing in non-fungible tokens can offer opportunities for profit, but it also involves risks. It is essential to : 

  • carry out in-depth research into the artist or creator, the origin of the token, and follow market trends. Is it authentic and of good quality? Check the background of the artist or creator, examine the details of the work and look for expert opinions or assessments. 
  • diversify your NFT portfolio to reduce risk. NFT projects are highly diversified. Don’t put all your eggs in one basket!  
  • anticipate costs: NFT purchases incur transaction costs, platform costs and storage costs. 
  • Follow the market, bearing in mind that NFT prices can vary considerably depending on demand, rarity, the artist’s fame or the notoriety of the collector’s item. Follow trends and developments to be ready to adjust your portfolio accordingly. 
  • call on professionals to manage your portfolio or advise you on your investments. You’ll benefit from personalised advice tailored to your risk tolerance and financial situation. r pour vos investissements. Vous bénéficierez de conseils personnalisés et adaptés à votre tolérance au risque et votre situation financière. 

How do you create your own NFT? 

There are thousands of use cases, so it’s up to you to find applications that haven’t yet been thought of. As you may have read earlier, the use cases that can be associated with an NFT are an image, a video, a patent, a physical or virtual object, a video game skin, etc. 

Selecting blockchain 

The creation of an NFT starts with the selection of a blockchain, each of which has its own specific characteristics, so it’s important to think about what we’re looking for in terms of the project’s objective.  

Popular blockchains include Ethereum and Tezos. They tend to offer more visibility and liquidity on the market. It is important to assess the ecosystem and community behind the blockchain when making your choice. 

Tokenisation 

Once the blockchain has been chosen, the user uploads the digital object they wish to tokenise (an image, for example). Tokenisation converts your real asset into a non-fungible token. 

Creating the smart contract 

A smart contract is then created to represent the object as an NFT. This contract can include metadata such as the object’s name, artist, creation date and other relevant information. 

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Investing in digital assets involves risks and is not suitable for all investors. 

Investors should inform themselves about the risks associated with the various digital assets. In particular, it is emphasised that digital assets can be highly volatile and that investments in digital assets present a risk of capital loss. In this respect, investors are reminded that past performance of digital assets, which may be indicated on the Banque Delubac & Cie website or in documents made available to investors, is not representative of future performance. In addition, investors should inform themselves about the technologies related to each digital asset and their risks, like flaws, defects, piracy, errors, protocol failures or attacks thereon. Banque Delubac & Cie cannot be held responsible for any misunderstanding of the risks associated with digital assets or for any losses that the investor may incur in the event of an error in the address of the portfolio attributable to the investor.

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