WHAT ARE NFTS AND HOW DO THEY WORK?

During 2021 alone, close to USD $41 billion was spent on crypto in the nft markets, with a transaction volume of more than 10 billion dollars as of the third quarter of 2021, and which reports a growth of more than 100% during 2022.

In the digital environment developed from the blockchain, NFTs constitute a flourishing market for digital assets in which various actors participate, monetizing digital content and granting autonomy to its owners.

In recent times, the concept of NFTs has gained special relevance, especially after the appearance of Meta and the possibilities that open up with the development of this metaverse.

But what are NFTs?

It stands for non-fungible token or non-fungible token, a concept that refers to assets that cannot be replaced due to their unique properties.

Thanks to NFTs – which can only have one owner – it is possible to tokenize things like art, collectibles, products, and even real estate. By operating under the Ethereum smart contracts platform -which is based on Blockchain and Big Data-, it is possible to guarantee the authenticity and non-duplicity of the assets.

NFTs: a growing market

As far as NFT markets are concerned, OpenSea is one of the most relevant. It is a platform with more than a million users and that concentrates around 80 million NFTs, mainly linked to video games and digital art.

The platform registered a transaction volume of more than USD $2 billion during the first months of 2022, showing its position in the market for new tokens.

As far as video games are concerned, the play-to-earn modality is growing by leaps and bounds thanks to NFTs. The concept translates as “play to win”, and responds to a trend in which players can earn digital assets and trade them without the need for third parties.

Axie Infinity is one of the games that operates based on an NFT economy, and its success has been such that, only during 2021, it reported revenues of more than USD $1.3 billion.

Non-fungible tokens can also operate as identification systems, as is the case with Stepn, an app that rewards users for running, something for which you need to buy the NFT of a shoe.

GMT, Stepn’s governance token, has had a rise of more than 1,500% so far this year, a clear example of the growth of this and other platforms that base their operation on this type of digital asset.

What elements and characteristics define NFTs?

The Ethereum network works as a virtual machine governed by blockchain technology, coded in Solidity, and which allows smart contracts to be signed.

The tokens, created in ERC-20 format, differ from NFTs in that the latter are unique and indivisible pieces, since they have a unique digital code that constitutes the signature of their creators. For their part, conventional tokens can be duplicated, as is the case with a cryptocurrency (1 ETH can be replaced by another ETH).

Function and utility

NTFs offer the opportunity for digital artists to sell or trade their works on digital markets through the Ethereum network. At the same time, they allow the generation of a digital economy in which new tokens support activities such as transactions, video games, fashion, etc.

NFTs open up the possibilities to explore new forms of art, such as virtual galleries, spaces in the metaverse, the creation of virtual products and much more. For example, one of the most revolutionary NFT markets is the sale of real estate in the metaverse, where profits of more than USD $85 million were recorded in January of this year alone.

It is important to recognize the scope of Blockchain and Big Data in the transformation of society, its influence in the development of new trends and, ultimately, in a way of relating to each other that is already setting the standard in world markets.