The function of NFTs: what are they and what is their relationship with brands?

Probably, browsing the internet you have come across the term “NFT” at some point. However, have you wondered what is the function of NFTs? Until some time ago it might seem that it refers to a technicality typical of certain areas of knowledge, however, it is more common than it seems.

Function of NFTs

NFT, or "non-fungible token" by its acronym in English, refers to a non-fungible asset or good. In other words, that it is unique and lacks equivalence. Throughout history, humanity has given value to tangible products that are in short supply, such as gold, silver, or artistic works. NFTs are precisely the same, with the exception that they are on a digital level and work under the rules established by the blockchain format validations.

In addition, it is necessary to distinguish between the function of NFTs and their counterpart, fungible goods. The latter have the quality of being interchangeable, thus preserving their value, money being their greatest representative.

Blockchain in the Digital Age Economy

NFTs are linked to the blockchain technology behind cryptocurrencies. This technology adds a unique code that allows a digital file to be traced and therefore makes it impossible to falsify. With this blockchain feature, NFTs become an unrepeatable creation.

NFT's could range from a textual quote, a virtual garment, a graphic work or a musical progression. In this way, when they are encrypted with the particular blockchain code, they will become a unique asset, with all the aforementioned characteristics.

Because of this, the traceability of a non-tangible token from a supply chain is ensured. In other words, if an artist who has created a virtual work under this concept decides to put it up for sale, there will be no need to look for intermediaries to carry out the transaction. Therefore, the buyer of the NFT in question will own the "token", however, the digital work will not belong to him. The work belongs to the creator. Also, when the buyer decides to sell the NFT to someone else, there will be a record of those transactions that will be visible to the blockchain users themselves.

When using a "p2p" (peer to peer) network, the existence of a single administrator is not necessary, as in traditional currencies, but all users are administrators. This makes these transactions more secure as intermediaries do not keep your data or trade with it.

The incursion of brands

eBay. The sales company has explored the incorporation of tokens and the commercialization of these digital goods, which can already be obtained on its portal.

Red Bull Racing Honda. The company that is part of Formula One launched thirty-three non-expendable tokens and fan-tokens for sale with the intention of celebrating the Abu Dhabi Grand Prix, which were all gone in one day. This was announced by the brand.

Twitter. Even social networks have joined the NFT's, because a few months ago Twitter gave away 140 tokens to its followers in GIF format. Despite having been given away, it is estimated that their value could reach millions of dollars.

Barbie. The firm sought to join the sale of NFT's, hand in hand with the French fashion company, Balmain. The mintFNT auction consisted of the sale of three unique assets featuring avatars of Barbie and Ken dressed by Balmain. This is the first time in the history of the Matel firm that it enters a completely digital scenario.

Panini. On its portal it is possible to get NFTs for sports licenses, selling trading cards and virtual cards.

Adidas. The renowned clothing and shoe brand announced its partnership with Coinbase and an investment within The Sandbox. The latter with the intention of developing a video game for iOS and Android in which users can try the products before buying them. Likewise, they will be able to design their own virtual models within the construction of the metaverse of the brand. In addition, mini-games are contemplated to win NFT's.

The world of video games

The function of NFTs in video games is based on the sale of a stock of objects. Weapons, characters and skins that could even be taken from one game to another, as well as sold to third parties. These elements provide a different experience with the premise of being able to obtain unique items for a limited time.

Although sometimes they have no other use, these elements are valued and consumed by a large number of users. This option allows, in theory, to sell everything that could fit the term NFT on its respective platform.

A clear example of this is the mechanics of the video game Axie Infinity, one of the most important titles. The game was released in 2018 by the Sky Mavis studio, based on the Ethereum cryptocurrency network. It is a game in which users can breed monsters (NFT's) to fight against other players.

Another of the more traditional games that has already implemented these mechanics is, for example, Mario Kart. In this title, it is possible to upgrade each character individually and sell them at a high price.

The dark side of NFTs

We can say that when a buyer acquires an NFT, the token is theirs. However, the truth is that the intellectual property continues to belong to the creator of said work. Likewise, when acquiring a skin, the buyer has the right to use it only according to the specifications of said transaction.

Finally, in the world of video games, there is a discussion. In a large part of the cases, while many users can generate money through the sale of NFTs, the majority lose it, which is why it is considered that in many cases a regulation would be necessary in this model.

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