This series of articles will delve into the concept of Non-Fungible Token, its place in the blockchain, its advantages, and its disadvantages (as well as the best way to counter them). It will also emphasize how you can participate in and benefit from the most important disruption since the advent of the Internet. Reading What is NFT (Non-Fungible Token) is a must to know first-hand the characteristics of these crypto-tokens.
After Bitcoin’s nearly 70% drop from its highs, it is imperative to talk about a type of token that is anchored in reality. To most people when they think of crypto it comes to mind as a digital asset without any physical backing. This is not true of many types of NFTs, and they are precisely 2TeamNFT’s specialty that we bet on from the beginning.
This article will describe the concepts of NFT and the tokenization of physical assets. A model that allows acquiring NFTs that represent something as tangible as a house, a 19th-century painting, or a financial asset. In the following posts, we will mention the relationship of NFTs with the markets, how to face their challenges and what is our vision in this regard.
NFT (Non-Fungible Token)
NFT stands for Non-Fungible Token. It refers to an asset represented by a blockchain token that, unlike traditional tokens, is unique. While an ETH token is exactly the same as all other ETH tokens, the same is not true for an NFT. Each token is distinct. It is uniquely identified by a contract address and a token identifier.
Like any other token belonging to a blockchain, it is immutable. It cannot be modified or forged and transactions are secure, fast, and traceable. Its price will depend on the blockchain and the charge it has at the time of the transaction.
NFTs act as a certificate of ownership of an asset, although such ownership is linked to a cryptographic wallet, not to a person, so that, except in systems implementing KYC, owners remain completely anonymous.
Tokenization is the process by which assets (even parts of them) are converted into tokens that can be registered, stored, and exchanged on a blockchain. This process is carried out by a smart contract, software designed to perform all these operations automatically.
These digital assets share a number of common characteristics that make them very interesting:
- They can be traded from anywhere in the world simply by using a device with Internet access.
- Very high liquidity.
- They are programmable and, therefore, fully customizable, easily adapting to the needs of each business/user.
- They are immutable. Once created, they cannot be altered, so there is no room for fraud.
Tokenization is usually performed on digital assets such as images, audio, or video, but also on intangible assets such as intellectual property and physical assets such as works of art (paintings, sculptures, etc.) and real estate.
What can be Tokenized?
Tokenization of digital assets is a relatively straightforward process. However, the same is not true for the tokenization of physical and intangible assets. In such cases, different legal and information access restrictions come into play, which varies substantially from one country to another. Thus, a work of art declared as a cultural asset by one State (declared as cultural heritage) cannot be transferred to another country without the express authorization of the latter. This is the case for certain works by ancient and modern artists, which must be taken into account when transferring the property.
Tokenization can also be applied to real estate assets, especially to the tokenization of the rights to sell and rent a property. In these cases, the software does not know relevant information such as the encumbrances that the property may have. The solution to this type of deficiency is provided by data oracles which are connections between blockchains and the real world. These are computer programs that allow them to connect with some centralized entities that store relevant information, such as in the case of real estate tokenization, the Land Registry Office.
NFT and Internet of Things
One of the fields in which tokenization has the greatest projection and is not very well known is the logistics and traceability sector. By assigning an NFT to any traceable item, it can be recorded throughout its life or logistics cycle without fear of adulteration. This is of vital importance in production and distribution chains and is becoming increasingly important in the field of the Internet of Things (IoT). Thanks to the IoT, any smallest element will be identified and connected to the network. In this way, sensors can be used to monitor environmental conditions anywhere, sensors for monitoring the health of clothing, stock control, and many other uses.
For this reason, it is essential to have a team of experts who choose the right assets and have the capacity to solve any problems that may arise.
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