NFT stands for non-fungible token.
Fungible is anything that can be exchanged or substituted with something of equal value. For example, If I have a $10 bill and you have two $5 bills and we trade your two fives for my one ten, nothing is gained or lost; we both still have $10 dollars. Some other simple examples might be a barrel of oil, a bag of rice etc. Of course, there are different qualities of oil and rice but you get the idea.
Non-fungible is just the opposite. Non-fungible describes something unique that cannot be easily substituted or replaced. The Mona Lisa by Leonardo da Vinci, for example, is non-fungible; there’s only one in the world.
A non-fungible item thus has three main characteristics. They are:
Fungible and non-fungible assets can be physical or digital. So far we’ve talked about physical examples. Let’s move on to the subject at hand.
The ‘token’ part of ‘NFT’ refers to the digital certificate that gets stored on a secure and distributed database called a Blockchain. An NFT receives its digital certificate when it is ‘minted’ on the Blockchain. Similar to how the Mona Lisa bears the signature of da Vinci, an NFT does as well, except that its signature is a digital one that gets recorded on the Blockchain.
Because the digital certificate for each NFT is unique, it’s easy to verify ownership because Blockchain is maintained by a network of computers.
It has unique attributes that make it different from something else in the same asset class like a painting, movie ticket, video game skin or Crypto Kitty, a digital cat collectible from the first-ever cryptocurrency game called Crypto Kitties where you can buy, trade and even breed digital cat collectibles.
Up to now, NFTs have gained the popularity in the realm of digital art. In March, a graphic designer who calls himself Beeple sold one of his works called The First 500 Days for $69 million dollars at Christie’s.
There could be endless use cases for NFTs. Digital art is just one example. There are other examples in video gaming, in collectibles like Crypto Kitties and NBA TopShot, and now even virtual land.
Once basic human needs are met is seems as though the next frontier is to create value out of things that seem to have no apparent value. So the question still remains, are NFTs really worth what people are paying and will they hold their value long term? I guess we’ll see.
Here are some popular places to check out NFT digital art: