NFT: Non-fungible tokens, the new blockchain fad

Irreplaceable Token: Behind this somewhat barbaric term hides a blockchain feature that has fetched thousands (or even millions) of dollars for some artists for quite some time. Enough to spark public curiosity in recent weeks, which in turn has led to the surprising popularity of this rather bizarre crypto-asset. If these applications have clear applications in the world of art and culture, the idea is applicable today in various fields, from video games to the sports sector.

NFT: What is this?

NFT is an abbreviation of the English term “non-fungible token” (or ten-year), which in French means “non-fungible token” (or non-fungible token). The token (or “jeton”, according to the translation recommended by the Commission for the Enrichment of the French Language) is a digital asset issued by the blockchain. Bitcoin (a cryptocurrency, or digital currency, is well known), Ether from the Ethereum blockchain, or XRP from the Ripple blockchain are all tokens. One of the characteristics of these tokens is their exchangeable nature: this term refers to the fact that one bitcoin is equivalent to another bitcoin and that, in principle, nothing distinguishes between them. It is an attribute of money and one of the arguments put forward by those who consider cryptocurrencies to be fully comparable to traditional money.

But this is not an obligation: the blockchain can issue completely non-fungible tokens, that is, digital assets that each have unique properties, and therefore cannot be exchanged for the other. Thus, NFT offers a non-fungible token with a specific cryptographic layer based on the ERC blockchain (Etherum Request for Comment). Thanks to this unique encryption and embedded metadata, the token can serve as a certificate of identification for any digital object (artwork, tweet, video game object, etc.).

Is NFT new?

not exactly. The concept of a non-fungible token first appeared on an experimental basis in 2015, with Etheria . project. This gave users the opportunity to have a part of the virtual world, with the properties of each part of the map being stored on the ethereum blockchain. This first pilot project at the time laid the foundations for NFT, using blockchain to record ownership of virtual objects and transfer ownership between different users.

If the Etheria project is used as the first proof of concept, it will be necessary to wait a couple of years before seeing the emergence of NFT in its modern form, which is implemented in particular by two projects: the Cryptopunks project, and the CryptoKitties project. Cryptokitties was NFT’s first big success at the time: it gave users the opportunity to collect virtual cats, with each cat represented by a non-fungible token containing its various properties. The success of the project, developed by studio Dapper Labs, caused a congestion on the Ethereum blockchain in December 2017 and prompted the founders of the project to develop another dedicated blockchain.

Building on these initial successes, the creators of Cryptokitties proposed a new token standard, ERC-721, which defines the main characteristics of this new type of token: irreplaceable and indivisible. This standard, powered by the Ethereum blockchain, has been quickly rejected by other players, who are offering their own versions based on different blockchains as needed. An entire market has taken advantage of these tools to develop their own NFT applications over the past four years.

Why is everyone talking about it?

The answer is short: because there is a way to make money.

Le marché de l’art numérique voit dans l’utilisation de ces tokens non fongibles un moyen de résoudre l’épineuse question de l’art à l’heure du numerique, en remplaçant de manière automatisée le précieux’ certificitune d’é artistic work.

Artist Mike Winkelman saw one of his digital works that sold for $69.3 million (in cryptocurrency) at auction at Christie’s in early March. But at this price, buyers don’t leave with a simple USB key that contains a copy of the work in question: it’s rather a unique token corresponding to that work, which certifies that its owner is indeed the rightful owner of the work.

But that’s not all, Jack Dorsey, CEO of the Twitter community network, put his first tweet up for sale at an auction in which the amounts approached two million euros. In the same vein, Canadian artist Grimes (also a companion to Elon Musk, both as eccentric as the other) offered some of her digital productions for sale online, which totaled 6 million.

Several niche platforms have opened up in recent years to exploit this context: they offer artists the opportunity to put their virtual works online and create an irreplaceable code that corresponds to the work in question. It can then be bought by interested parties, resold, given up and can lead to speculation. It can even be stolen from you, like any digital asset, and resold at low prices to unscrupulous buyers.

In addition to artists, many sectors of activity see this technology as an opportunity: the video game industry did not wait for the emergence of the NFT for trading in virtual objects, but the use of the blockchain eliminates the central role of the game publisher in the transactions of virtual objects. In the field of sports, the NBA has also decided to offer a digital version of its collectible cards by launching the NFT platform, developed in partnership with Dapper Labs, which offers a virtual equivalent of its collectible cards in the form of redeemable non-collectible tokens. The case would have brought in nearly $240 million in sales in 30 days, and the publishers and the National Basketball Association were compensated through commissions on transactions and the issuance of new cards.

And what about the planet?

Among the many criticisms leveled at non-food items (NFTs), criticisms regarding the impact on the environment have been the most common. As is often the case with blockchain applications, the impact on the environment is one of the topics where it hits the shoe. Many blockchains, including those of Bitcoin (referred to by Elon Musk in early 2021) and the Ethereum project, rely on a verification system known as Proof of Work, which takes a lot of electrical power to validate new blocks. If some projects aim to develop the protocol in order to switch to less expensive verification models in terms of computing power, then it is quite reasonable to consider the blockchain sector unnecessarily energy-intensive. The controversy has been energizing the entire sector for several years and it is clear that NFTs are no exception.

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