What the hell is an NFT?

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Coinmonks

4 min readMay 21, 2022

Disclaimer: The purpose of this article is purely informative, always do your own research before investing.

Surely you have already asked yourself; You may even know that an NFT is a Non-Fungible Token, but you still don’t understand anything. Quite simply, they are pieces of virtual content with a property right attached to them that sell for millions of dollars, but that’s not all. So what are NFTs really? What are they for? Can you make money with them?

Let’s go to the beginning: we know that property rights are essential for the proper functioning of business and society. Thanks to these, we can transfer possession of a good from one person to another. Fulano has to own his house in order to sell it to Mengano. And, to want to buy the house, Mengano has to know that it will be his after paying Fulano. Do we agree?

NFTs are simply pieces of virtual content that have a proprietary right attached to them. In the same way that an artist can issue a certificate of authenticity for work, an author of an NFT associates his “token” with a certificate of authenticity stored on the blockchain. Thus, since each time the token is transferred, the certificate is also transferred, it is possible to know with certainty who it belongs to.

From this, a new way of storing value is created, a digital asset with its respective property right, HBR (2021). And why is this relevant? From finance, any asset class that can generate returns can be considered relevant. If there is a way to make money with something, it will attract the attention of many. Some examples of the ways in which these NFTs are used are art pieces, trading cards, virtual worlds, items within video games, and real estate in the metaverse, among others.

Fulano owns an NFT of a house in a virtual world and wants to sell it to Mengano. Since the house is associated with a property right, Fulano and Mengano agree on the price, and the transaction is carried out: Fulano receives money (cryptocurrencies) and Mengano receives a house (an NFT part of a virtual world.). Therefore, the existence of NFTs solves the problem of property rights in the digital age. This can bring opportunities for artists or content creators since, thanks to NFTs, digital artists can have access to a much larger demand.

Right-click and save image as…? Why don’t we just save the images and go?
Having the stored image of an NFT is the equivalent of having a photo of a painting: you can use it, but it doesn’t mean you own it. Just as what gives value to the owner of a painting is having it physically, what gives value to the owner of an NFT is the certificate of ownership.

However, not everything is rosy. As Duke explains in a Bloomberg article (2022), the creation of new financial assets brings with it speculators who distort the market. That’s why the image of a monkey is worth more than my house. In addition, apart from the environmental cost they generate, the anonymity associated with the world of crypto gives space for many types of scams, considering that there are still no clear regulations for these types of assets.

All in all, NFTs do make sense as a new technology that serves a purpose and solves a problem in the digital world. Speculation and the desire to make quick money are the ones that bring controversy around the subject. Essentially, the market for NFTs has an uncertain future as we probably haven’t figured out their best uses yet. Being a young technology, its applications present infinite possibilities.

Now that you know what they are, you can tell your friends or think of new ways to use NFTs. Once again, we have to destigmatize the concept so that it is not just speculation and financial bubbles; Go beyond quick money and think about how to use new technologies for the common good.

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What the hell is an NFT?

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Written by Stefano Uccelli