What Is An NFT? Non-Fungible Tokens Unboxed

October 23, 2022

NFT (non-fungible token) is a non-interchangeable token that is “tied” to a single object, this object can be: a photo, a picture, a gif, a video, a music track, a character in a game, etc. digital content. In simple words, NFT is a unique token, it is like a digital entry in the blockchain registry, which gives you the rights to own a unique object of digital space. This document is stored in the user’s crypto wallet, just like other cryptocurrencies.

Any unique object can be turned into an NFT. And it doesn’t matter if it’s a “Mona Lisa” or a drawing of an unknown person — the technology is the same. But no one needs a drawing of an ordinary person: only a couple of his friends may be interested in them. Therefore, usually, objects of value are translated into NFT, otherwise, there is simply no sense. You can take a look at the top NFT collections of October 2022 on buidlbee.com.

So now we will answer the most common questions about NFT.

“Did the copyright also pass to the buyers?”

No, they bought only the token itself and certain rights to it, which are fixed in the contract, but they did not become the authors of the object. Pink Dog still belongs to Dota 2, Mike Shinoda remains the author of his songs. The exception is cases when copyrights are transferred together with the sale of NFT and this is reflected in the contract.

Usually, buyers get limited rights: for example, the owner of the pink dog NFT can use it in the game, the owner of the NFT Mike Shinoda — listen to tracks at least indefinitely, the owner of the NFT tweet — post them on the Internet, for example, on his page in the social network. They can also sell their tokens to other people.

“Wait, but all this can be found on the Internet for free!”

Reproductions of paintings can also be viewed on the Internet, but collectors still buy originals. So is NFT: if you buy, for example, a token of a famous meme, it will continue to walk on the Internet, but you will be its actual owner. This is a matter of prestige and belonging to art: many people like to own the original.

“Why do I need NFT?”

Ordinary users should hardly consider NFT as a field for investment. But, of course, if you want to, then you can.

NFT is needed by creators: musicians, artists, authors of unique photographs, and website developers to digitize their works, secure copyrights, and protect themselves from data theft. Yes, and to make money on your creativity. Also, NFTs are needed by art lovers, and collectors — everyone who needs to have unique objects, even in digital form. Judging by the amount for which NFT is bought, collectors do not spare money.

“How can I buy NFT?”

We also start a wallet, go to the trading platforms and choose tokens. You can buy NFT at the stated price, you can participate in the auction. In the first case, the money will be immediately debited from your crypto wallet, in the second, too, if your rate is the highest. The principle is the same as in a regular auction. Different platforms have different rules and commissions — both for sellers and buyers. We will not dwell on this in more detail in this article.

“Are there any risks of NFT? How serious are they?”

Briefly — there are, and serious. To buy and sell tokens, you first need to pump the theoretical base: to understand all this cryptocurrency and blockchain. This applies to any kind of promotion.

Cryptocurrencies have their exchange rate, which is characterized by increased volatility. NFT is not yet regulated by law, and this scares many people. The ownership of tokens is not regulated by law. Since there is no legal regulation, financial regulators can determine the status of NFTs as securities. According to the latest news, the US Securities and Exchange Commission has just begun to study the NFT market for violations of the securities act.

We hope that thanks to our review, you have fewer questions regarding NFT. If you are interested in this topic, then first carefully study all the theoretical questions and only then proceed to practice.