An NFT is a non-fungible token that has a certain value depending on different factors
We’ve all heard of the word NFT at one time or another, but it doesn’t seem to be entirely clear. It’s not as complicated as it seems. Before we understand what an NFT is, we need to understand what a non-fungible token is.
Let’s start with the first thing. We place ourselves in our legal system to know that there is a fungible good, that is to say that it can be exchanged as for example money. You can exchange a 20-euro bill for another 20-euro bill or for a menu in a restaurant. On the other hand, a non-fungible good can be a work of art. On the other hand, a non-fungible good can be a work of art, since it cannot be consumed, nor can it be replaced by another work of art. You have a painting and you cannot use it, nor can you substitute it for another. This is very close to what an NFT is only that the painting would be in digital format.
As you know, gold is interchangeable. You can exchange one nugget for another without any problem. We are all very clear that gold is a store of value. However, there are other goods made of gold that are unique, that is, they cannot be exchanged for others of the same value. Why? You may ask. Because no two NFTs are of equivalent value, therefore, no such barter can be executed.
An NFT is like a unique work of art, just as Velázquez’s Meninas are only in the gallery of the Prado Museum in Madrid. In order to obtain that work of Velázquez you would have to go on sale and buy it or make a copy of the painting. If you make a copy it would lose all its value because it is not the original. The same thing happens with NFTs.
Now that we know what NFTs are, we must understand how they work
NFTs work through blockchain technology and each one of them is assigned a digital certificate of authenticity. This is thanks to a series of unalterable metadata that guarantees that authenticity.
It records both the starting value of that NFT, as well as all the transactions that have been made around that particular NFT. Thus, both the initial value of the NFT and the value of each of the purchases that have been made around that NFT are recorded.
In addition, the author of the NFT work in question is registered. This protects both the intellectual property of the author and the owner who obtained that NFT.
NFTs are purchased because they are thought to substantially increase in value and also because of the unique utilities they can offer once acquired. Being a unique asset, over time it can increase in value and that is what its buyers take into account.
Finally, utility NFTs are those that grant the owner a series of privileges or rewards that he would not have access to in any way if he did not buy that NFT.