Edited by

Domenico Macellaro

Web 3.0

What are NFTs and how to use them

How to buy and sell them, taxation and risks of the NFT market





Since their explosion in the market last year, NFTs have revolutionized the market for trading, cryptocurrency, art and digital collectibles as well as fashion and gaming.

The name NFT is an acronym for non-fungible token, which is a kind of "placeholder" with specific individuality that functions as a certificate of authenticity and digital ownership connected to the name of its holder as well as a link representing the actual asset-most commonly an image, video, animation, digital artwork or cosmetic items for video games and avatars in the metaverse to have their avatar wear.

The authenticity promised by the NFT is guaranteed by Blockchain technology, which in addition to representing an indelible signature on the object is also capable of recording all the changes in its ownership, thus providing a true family tree to any virtual and non-virtual asset that has been purchased.

The Blockchain is a kind of registry in which information is decentralized, that is, distributed over multiple "nodes" that enable both the tracking of every transfer and the management of individual transactions without intermediaries-the contents of this registry can always be consulted by everyone and, most importantly, cannot be modified.

Taking an example with the art world, we could say that there are many different copies of the Mona Lisa in the world but the true original image is only one - in the digital world, that true image constitutes the NFT, which can be copied but never truly owned in its original form.

How can NFTs be bought and sold?

At this point it becomes important to understand how and where NFT transactions take place. There are several online marketplaces, very different depending on the type of digital asset being sold.

The most common are those in which digital artworks are sold or exchanged, such as Opensea or Magic Eden, but each NFT exists on specific platforms: for example, there are NFTs that are available exclusively on certain marketplaces and that because of these arrangements, their buying and selling can take place only in the "bubble" of that marketplace; in other cases, however, some NFTs, especially those dedicated to the world of video games or born on certain metaverses, are valid and functioning only within them.

To purchase an NFT from any platform, one will first need to purchase the cryptocurrency Ethereum (ETH), which will be stored in a digital wallet named Cryptowallet that is accessed with a CID, which stands for Holder Identification Code, or a password with letters and numbers. Again, there are several platforms that allow you to open your own wallet, you will need to decide according to your needs which one is the most convenient.

Once you have created and filled your digital wallet, you can connect it to the marketplace of your choice where you can buy any NFT you want just like in a normal e-shop. The NFT you buy will be stored in your wallet but can be used on many different platforms-even some social platforms such as Twitter and Instagram have started early tests to turn account profile picture boxes into showcases where you can display your NFTs.

How can NFTs be used?

There are several ways to use NFTs-whether you want to trade privately or seek opportunities for a company.

Primarily, NFTs are relevant in the digital art and collectibles market: any object, sculpture, 3D animation, image, video or music file can be bought and sold in its digital form and displayed in the physical world through screens or through the physical counterparts of the purchased work (which are sometimes sold along with the non-fungibility token); and in the virtual world within metaverses such as Decentraland or The Sandbox.

Another possible application is in gaming, where NFTs can represent cosmetic items that one's character/avatar can use in the metaverse that a certain avatar can wear but can also be traded with other users.

From the perspective of companies, however, NFTs can be first and foremost a form of targeted investment, since the value of NFTs, much like that of works of art, can increase over time.

Since they function as unalterable certificates, then, NFTs can have declinations in real estate, for example by registering the transfer of ownership of a property, or in the field of loans and insurance on smart contracts.

What are the risks of the NFT market?

It is clear that trading NFTs can involve risks. In the event that the creator of an NFT wants to multiply his profits, he could register the same work on two different platforms or sell the same work multiple times with minimal modification, even if it is for a single pixel.

The blockchain that certifies the individual NFT in fact represents a specific binary code that we see in the form of an 'image but is actually a long string composed of zeros and ones.

Many specialized law firms are working on creating smart contracts that better regulate the rights for this type of asset.

The issue related to the servers of the various platforms, on which the entire network relies and which could crash or be hacked, is also being resolved with the first studies on the use of IPFS (acronym for InterPlanetary File System) protocols capable of propagating a file on all the computers of the connected people.

What's more, NFT-related transactions are not quite as regulated as other types: cryptocurrency exchanges, in fact, are often used to launder "dirty" money to be hidden from the eye of tax authorities.


The first piece of advice we feel like giving to any beginner is: first of all, to meticulously make sure that the platforms used for exchanging money and buying and selling tokens are legitimate.

The second piece of advice is to approach trading with caution, reserving the most important purchases and sales until you fully understand the various dynamics of buying and selling and fluctuating value of the pieces.

If you have any doubts, curiosity or further information regarding the content of this article, the Fontoso Team is at your complete disposal. Contact us using the appropriate form in the Contact section.