What are NFTs (non-exchangeable tokens), how are they created and sold
NFTs or non-exchangeable codes are the new craze that has hit the internet community recently, in a matter of a few months, we were all surprised by many works of art and videos that sell for thousands and hundreds of thousands and even millions of dollars, without their owner obtaining any property rights or even usufructs. .
Global news channels have panicked since EVERYDAYS: THE FIRST 5000 DAYS, by Michael Joseph Winkelmann, known in the industry as Beeple, was sold for $ 69 million, yes the number is right, $ 69 million, after which he becomes the third richest artist alive today.
NFTs: Non-exchangeable tokens sold in the millions
The word NFT has no clear equivalent in Arabic, not even an agreed translation, but we will express it as non-exchangeable symbols as a smart translation of the non-fungible token in English.
These codes are described as non-exchangeable. That is, it is not characterized by the characteristic of Fungibility, what suffers because it is distinctive in a way or with a more “authentic” Arabic word, for these symbols are one of a kind not similar to any other symbol, they are exactly as experts say about them as the original Mona Lisa by Da Vinci, which is estimated at $ 850 million. Or as a starry night painting, which has an estimated value of $ 80 million.
These irreplaceable icons like panels are one of a kind, and you are the one who gives them their value when you own them. But the difference is that you only own it digitally on the blockchain, and other people can copy and use it like anything on the Internet, and that you also don’t have real property rights to it, not even a usufruct, mad right?
This madness is defended by rich buyers who spend millions on these tokens; It is like art having a great value, whether it is a work of art or a snapshot of your favorite basketball hero, or even the first tweet on Twitter of the inventor of Twitter Jack Dorsey, which, by the way, was sold for 2 million 915 thousand US dollars, so the value of these things – in their opinion – in Owning it and bragging about owning it.
You might strongly object to this and think that it is just throwing millions into nothing … especially when you know that if you bought, for example, a scene of Dunk in the form of an NFT from the NBA, it will not retain its ownership rights, that is, if you use the clip, for example in a video of you on YouTube, he will deal With you as if you violated property rights despite buying this clip from them for thousands of dollars.
As for the term tokens, it represents its technical part, as these tokens depend mainly on the encryption techniques of Blockchain That allows you to deal with it as if it is a crypto asset owned by one of you, and you can make sure that you own it through this encryption process, and we will talk about this part in more depth later.
The conclusion is that NFTs or non-exchangeable tokens; They are virtual assets that a person owns on the blockchain database, so that he owns a key or code if it is entered, it is ensured that this person is the original owner of it, but despite this – the virtual – ownership and despite the sums paid in it, its owner does not have the right to ownership and usufruct. Even when using it, it may receive an IP infringement warning.
Blockchain and NFTs: The backbone of non-exchangeable tokens
To understand how NFTs work, we need to understand blockchain technology, and to understand blockchain, we have to understand what is meant by encryption or encryption and so we will start with it. Encryption is the process of ensuring the confidentiality of the data or information that you transmit through a number of complex algorithms, which makes knowledge of the data that has been encrypted. Very difficult, and it is a technique widely used on the Internet to maintain privacy.
For example, the WhatsApp application that we use is considered an example of End to End Encryption, meaning that the messages you send are encrypted, and they are only decrypted when they reach the person you are messaging with, so then they can read the messages, and this process ensures that if anyone can Somehow he gets in the way of this message, not being able to read it, because he’s not able to decrypt it.
The encryption process for this reason is two-way. That is, it is possible to reverse it, but what if another technology does something like this, but only in one direction and is not reversible. Wouldn’t it be a little safe when used to protect your property and prove your ownership of it?
It would definitely work, well luckily it exists and it’s called hashing algorithms, and it’s used in blockchain and non-exchangeable tokens.
These hashing algorithms are able to convert data into a specific array of entered numbers and letters, so that if one letter of the input data is changed, the entire array changes. This process is one-way. That is, it is almost impossible to reverse it, so even if you own the array, it will never be able to generate the entered data.
These algorithms are used in blockchain to ensure that the owner of the asset or currency is the person actually converting it, as we talked about in an article Cryptocurrency wallets; Each wallet has a private key and a public key that is extracted with hash technology.
This public key can be given to anyone to transfer funds to you, while your private key is confidential because it is the only means that enables you to complete your transfers, which confirms to the blockchain that you own the currencies that you are transferring, thus allowing this transfer.
After doing this, this property is registered on the blockchain, and that is what matters to us in making the tokens that are not exchangeable, which through the blockchain contains a proven record that cannot be falsified for who is the owner of these tokens, who made them, and the date of their transfer, as the blockchain in general is possible. Similar to a large excel file that saves conversions between individuals and validates them.
Now we can talk about what a token is, and it is very similar to cryptocurrency like Bitcoin And the EthereumHowever, it needs a blockchain platform and doesn’t have a platform like Digital currenciesBy and large, most of the non-exchangeable tokens are based on the Ethereum platform and on Smart contracts Which is done with Ethereum currencies.
The various origins of non-exchangeable tokens
You may be surprised by this, but this image above has sold for $ 69 million this year in the form of NFT, and there are many more that are being sold in fancy numbers, and you might think that NFTs are only limited to panels, but this is not true as non-exchangeable symbols are more flexible assets. Than you think.
You can buy and sell music as a symbol that is not exchangeable, and deal with it just as you deal with paintings, pictures and artwork, but you can also use texts in the same way, and sell them on many popular platforms.
The world of NFTs knows no boundaries, whether for crazy prices or craze for creativity, there are non-exchangeable icons that come in the form of video games, and designs for Virtual Reality And augmented reality, and who knows there might be more exotic examples of virtual NFTs.
Investors deal with these pieces that they buy as an investment like any investment in real estate or in gold, and they use them in order to preserve their wealth, and to make sure that their value increases over time so that they can sell them later to obtain profits that exceed what they paid in it.
How to create and sell NFTs?
Although it seems a bit complicated, and it takes a person to be a computer scientist or a blockchain specialist, it is the exact opposite, as making non-exchangeable tokens is easy and clear and can be summarized in four steps, which are:
- Open a wallet that supports Ethereum.
- Buy some Ethereum to pay for business and display the tokens that are not exchangeable.
- Connect your Ethereum wallet to the non-exchangeable token selling platform.
- Create non-exchangeable icons and display them on the platform.
The first step: open a wallet that supports Ethereum
The first step will be opening a wallet that supports Ethereum to pay the costs of making NFTs in addition to receiving money on it, and you can choose from any type of wallet, but usually specialists choose mobile wallets, such as: Coinbase or Rainbow.
Step 2: Buy some Ethereum to pay for business and display the non-exchangeable tokens:
You will need to buy some Ethereum, and the best way to do this is to specify that, for example, you will buy for $ 100, and how it differs depending on the wallet you use, you can buy Ethereum directly from your Rainbow wallet while you need to buy it from an external platform if you use Coinbase wallet.
Step 3: Connect your Ethereum wallet to the non-exchangeable tokens selling platform
In this step, you will connect your wallet to the platform you have chosen, knowing that there are many platforms, and you will choose the method of delivery according to the type of wallet you use, but often you will only scan the QR code from your mobile phone wallet.
As for the platforms for non-exchangeable icons, there are many of them, but I will only mention the most famous among them:
The Rarible platform is one of the most popular non-exchangeable token selling platforms, and it is preferred by many due to its ease of handling, and its users liken the process of uploading NFTs to it by uploading photos on Instagram or videos on YouTube with the utmost ease.
SuperRare is one of the most unique platforms for dealing with non-exchangeable icons, as it only specializes in paintings and artwork, so accessing it is like a fun trip in a museum or artist’s workshop.
The Nifty Gateway platform is very similar to the SuperRare platform, but it specializes in paintings and artwork in music, and it tries to provide a kind of high-quality icons, and one of its advantages is that it allows you to buy through credit cards directly.
OpenSea, one of the first non-exchangeable token platforms, allowed buying and selling of various types of NFTs.
Zora has the advantage of allowing NFTs to be made from text and script, not just the usual shapes like panels, photos, and videos.
Fourth step: Create non-exchangeable icons and display them on the platform
This is the most important and reliable step for you, in which you will create your own token, which you want to sell and convert to NFT, and then you will display it on the platform and choose the starting price for the bid on it and display it on the platform, and despite this, you have to take into account the costs of this conversion as It will cost you between $ 70 and $ 160, depending on the platform.
You also have to calculate the commission for the platform you will sell from and the expenses for withdrawing funds, and for this reason the expenses may be more expensive than the selling price of your piece, and you should think carefully before thinking about making and selling a non-exchangeable symbol.
Are non-exchangeable icons a bubble?
Many economists object that this growing obsession with NFTs is just a bubble, and soon they will end and disappear, or at least they will be valued at more realistic prices for their true value instead of this inflation in value that we are witnessing.
There are also a number of NFTs who think so Michael Winckelmann The artist of the $ 69 million painting said: He sincerely believes it may be a bubble and will soon be over.
Specialists tell us that the issue of non-exchangeable symbols being just a bubble returns to nature, whether they are paintings, videos or music, it does not include their property rights or usufruct rights.
Rather, it is just a link that points to the record of your ownership of it, which confirms that you now own it on the blocks of the blockchain, just as it tells us about the original artist who made it, and who bought it and sold it to whom … until it reached its current owner.
Recently, we are witnessing the partial burst of this bubble. According to the CNN, the average price of one non-exchangeable symbol on April 5 is only $ 1256, while it was less than two months ago, that is, in late February, it equals about $ 4000 per symbol.
Which is a big bump at the moment, will we see this bubble burst soon or will the non-exchangeable tokens have a different opinion?
Environmental objections to NFTs?
The risk of NFTs being a bubble or not is the most prominent objection in the arena, but there is also a very strong objection that it is destructive to the environment, the process of making non-exchangeable tokens needs a great deal of electric energy, just as mining Bitcoin or Ethereum.
Of course, a large part of the world’s electricity comes from burning fossil fuels, which causes an increase in carbon dioxide levels in the atmosphere, which leads to very large environmental damage.
Do not underestimate this damage, as mining bitcoin alone needs the same amount of energy annually as a large and developed country like Switzerland, with its population of about nine million.
This is what was the reason for Tesla’s reversal of its decision to allow the purchase of its cars using Bitcoin currency in order not to cause further damage to the environment … especially after the environmental disasters that struck the world in the past few years.
No one knows exactly how much energy the non-exchangeable tokens need, but we know that the Ethereum that depends on it needs 26.5 terawatt hours per year, equivalent to the consumption of a large country like Ireland with its population of about 5 million people, which poses a great risk to The environment and its expanding use could harm our blue planet more and more.