The impact of NFTs on the cryptocurrency market

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The impact of NFTs on the cryptocurrency market It has become one of the terms that have emerged with greater force in recent years. This di...

The impact of NFTsThe impact of NFTs on the cryptocurrency market

It has become one of the terms that have emerged with greater force in recent years. This digital certificate of authenticity based on blockchain technology (the same technology on which cryptocurrencies are based) has become one of the backbones of a future that is becoming more and more present.

We are talking about the NFT. What exactly? Why has it attracted more and more interest? Next, we will talk about it. Take note!

What are NFTs?

NFT is the acronym for Non-fungible token. It is therefore a unique asset that cannot be modified or exchanged for another of the same value. Its specificity is total. No two NFTs are the same. In addition, another of its distinctive features is that it is a digital asset and, therefore, in most cases, it does not have a correspondence with the physical or material world (although there are some exceptions).

In order to better understand the implications of its definition, we could compare it to a work of art. Like, for example, in Van Gogh's Starry Night, an NFT is unique. There is only one and it is in the Museum of Modern Art in Manhattan. If someone wanted to acquire said work, they would have to buy it (if it was for sale) or, failing that, buy a reproduction. However, in this case, it would no longer be the original, so the said copy would be worthless.

Something very similar happens with NFTs. The buyer who owns an NFT has the original in his possession and it works as a certificate of authenticity that also gathers the related acquisition rights.

But how exactly do NFTs work? What exactly is it that provides them with value?

Any kind of digital content is susceptible to tokenization. Through blockchain technology and the formalization of smart contracts, it is possible to integrate a set of metadata in any type of file to corroborate its authenticity, identify its owner or record its original value, acquisition, or the history of the transactions which it has been the subject throughout his life. It is relatively easy to check who is its legitimate creator, who has carried out its tokenization and who has bought it, when or for what amount.

In reality, there are practically no limits. It is possible to tokenize any kind of file or digital content. From images or graphics to memes, electronic books, or even tweets. At the time it is carried out, a digital certificate of authenticity and property is generated that recognizes it as a unique asset and establishes who owns the property rights (which, by the way, are different from copyrights, these continue to belong to the legitimate author of the work or file in question).

From an NFT, different types of links can be formalized. In this sense, Smart Contracts become an essential resource to provide coverage for different needs. For example, based on these smart contracts it is possible to guarantee that the original artist receives a percentage of the profits that are produced with each sale.

Relationship NFT and Cryptocurrencies.

Although both concepts are related, the truth is that they are not synonyms. An NFT works with cryptocurrencies to formalize transactions and is also based on its blockchain technology. However, the nature of the asset is configured differently.

In the case of cryptocurrencies, we are not talking about exceptional units. These can in fact be interchanged under the principle of equivalence. In the case of NFTs, this is not possible because each cryptographic asset is structured based on an identification code and through metadata that gives it a unique value and differentiates it from others. We can make an exchange of one bitcoin for another since both have the same equivalence. However, the NFT trading processes are not as precise or as simple as they are not matched in terms of value. Its commercialization and distribution are relegated to specialized markets such as Ethereum, Opensea, or NFTcatcher.

Future of cryptocurrencies and NFTs

Although NFTs are not something new, over the last year they have become quite popular. Somehow they have acquired greater credibility and little by little they have been integrated into a more everyday sphere. Its applications have been increased in a context in which digital transformation has spread to all areas of the market and the economy. NFTs are an effective resource to guarantee exclusivity and authenticity to all kinds of digital elements and files.

Taking into account that transactions are going to take place in the Metaverse, the verification of the transactions and the value of the assets becomes a fundamental element. His role within the digital universe will be a priority in a close one that is closer than one tends to believe. The adaptability of this technology to the growing needs of an infinite universe translates as an important element of the unification of different dimensions of the Internet.

Need to educate yourself financially

Obtaining financial training through a master's in finance in this transition phase becomes a necessity rather than an option. Both users and companies are committed to investigating a reality that is less and less future and more present. Not long from now, companies will begin to offer their products and services in an entirely virtual way based on NFT and the Metaverse will undoubtedly be the great revolution.

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Cryptocurrency Magazine - Crypto Market Updates: The impact of NFTs on the cryptocurrency market
The impact of NFTs on the cryptocurrency market
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Cryptocurrency Magazine - Crypto Market Updates
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