NFT Meaning: What are NFTs and how do they work?

Starmkgunu.co.in – So that you can understand what’s behind news like that person who paid 260,000 euros for a rock drawing . In Engadget you already have an article explaining you in a more technical and complete way , but at Engadget Basics we are going to try that anyone can understand the concept of how it works.

Therefore, we are going to try to get away from technicalities to make the explanation as simple as possible . We will tell you first what non-expendable property is, as it is a vital concept to understand NFTs. Then, we will go on to tell you what NFTs are and we will also briefly go into how they work.

NFT Meaning: First, what are non-expendable property?

To understand the concept of NFTs, we first have to know and understand that in our legal system, there are expendable and non-expendable property . Expendable goods are those that can be exchanged, having a value based on their number, measure or weight. And non-expendable goods are those that are not substitutable.

An example of expendable goods is money . If you have a 20 euro bill, this is a consumable item, since you can easily exchange it for another 20 euro bill, it does not lose value and it is exactly the same. Also, this ticket is consumed when you use it.

And on the other hand, an example of a non-expendable good would be a work of art . If you have a painting at home, it is not consumed when used and cannot be replaced by another painting. One work of art is not equivalent to another , and therefore cannot simply be exchanged as with a 20 euro bill.

What are NFTs

The acronym NFT stands for Non -Fungible Token, a non-fungible token. Tokens are units of value that are assigned to a business model, such as cryptocurrencies . And it is that NFTs have a close relationship with cryptocurrencies, at least technologically, although they are opposite, since a Bitcoin is a fungible good, and an NFT is a non-fungible good, but in essence, they are like the two sides of a technological currency.

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For you to understand well, we can think of cryptocurrencies as a store of value, something similar to gold . You can buy and sell gold, and when the number of buyers increases the price rises, to go down when this number of buyers decreases. It is a behavior equal to that of cryptocurrencies.

But the gold in the end is gold, and you can exchange one nugget for another without problem. However, there are other goods made of gold that also have a value, but they are unique, and that fact makes a difference and gives them another type of value. Like that value made with gold or a work of art, NFTs are unique assets that cannot be modified or exchanged for another that has the same value , since there are no two NFTs that are equivalent just as there are no two paintings that they are.

Therefore, you can think of an NFT as a great work of art, like Da Vinci’s Mona Lisa. There is only one and it is in a specific art gallery. If you want it, you can only buy the original if it was for sale. You could also get a copy, but it would have another value, since it would not be the original. Well that is exactly what the NFT does, but digitally.

To understand it better, an NFT would be like a unique work of art, for example, Michelangelo’s David, there is only one and it is in the Gallery of the Academy in Florence; If someone wanted to have that particular David, they should buy it (if it were for sale) or get a copy, in which case, we would no longer be talking about the original, which is what gives the sculpture value.

For this reason, NFTs are often attached to some digital works or illustrations. Its price is really what people want to give it, and now that they are at a peak of popularity, we can find that there are people who pay 260,000 euros for the drawing of a rock attached to an NFT.

How NFTs Work

NFTs work through blockchain technology or . It is the same technology as cryptocurrencies, which work through a decentralized computer network, with blocks or nodes linked and secured using cryptography. Each block links to a previous block, as well as a date and transaction data, and by design are resistant to data modification.

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NFTs are assigned a kind of digital certificate of authenticity, a series of metadata that cannot be modified. In this metadata its authenticity is guaranteed, the starting value and all acquisitions or transactions that have been made are recorded, as well as its author.

This means that if you buy a digital content tokenized with NFT, at all times there will always be proof of the first value it had, and how much you bought it for. It’s like when you buy a painting and keep track of where it moves.

In general, most “tokens” or NFTs are based on the standards of the network Ethereum and its blockchain. Thanks to using a well-known and popular technology, it is easy to trade them to buy and sell them using certain wallets that also work with Ethereum. However, we are talking about unique works, so there is no active sale as in digital currencies.

Why do people buy NFTs?

If NFTs cannot be bought and sold as easily as Bitcoin, then why do people buy and spend so much money on them? Well, it is simple, because they believe that its value will increase over time, and then they will be able to sell it for more money. Nobody spends 260,000 euros for the drawing of a rock because they like the drawings of rocks, since they can have them for free, but because of the value that this particular drawing has as it is an NFT.

The idea, therefore, is that if I buy an NFT for 100,000 euros, in the future I can resell it for more money . It is a unique asset, which in theory should give it a higher value since there is no other like it.

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