Yes, I imagine that you have already heard about NFTs, they have become very popular in recent months, but it is still difficult to understand what they are and how it is possible that there are people paying thousands of dollars or euros for a digital illustration of “a rock”, for example.
So today we are going to try to give the simplest possible explanation of what NFTs or Non Fungible Tokens are, which is what their acronym alludes to.
Let’s go step by step because to understand this we should first talk about what non-fungible goods are, and by this, we mean a good that cannot be interchangeable for another due to its unique characteristics. For example, if you have a work of art by Picasso nothing can replace it, you can exchange it for another one or sell it, but in exchange, you will have another work of art that will have a different value or money, but it will never have the same characteristics or value. Maybe you can make a copy, but logically it will not be worth the same as the original.
The same thing happens with Non Fungible Tokens or NFTs, only now that we are in the digital era we refer to those unique assets that cannot be modified or exchanged for another one that has the same value because there are no two alike.
Now, how do they work?
NFTs work through Blockchain, which allows having data secured using cryptography and associating them to dates, transactional data, among others, which cannot be modified. In this way, each NFT has what could be called a “Digital Certificate of Authenticity” that contains data such as the starting value, the history of transactions related to it, as well as its author and date of creation. So if there is a token you can always have information about its path from day one.
The most important question is: Why have they become so popular?
The NFT market is a bit more complex than the cryptocurrency market. However, the interest in these has increased exponentially, as these assets are expected to appreciate over time, making those non-exchangeable assets that you acquire today for a few dollars perhaps worth millions in the future thanks to their unique characteristics. Kind of like collecting baseball cards.
