So… What exactly is an NFT?
What is a NFT?
An NFT stands for Non-Fungible Token. NFTs remain only digital and it is essentially a way to buy and sell digital objects. For instance, an NFT can be any form of a digital asset like art, music, videos, gifs, and etc. NFTs contain identifying information that is recorded into smart contracts. This identifying information is much like your own fingerprint, it is unique and cannot be replaced by another token. The identifying information is stored on smart contracts and is recorded on the token’s blockchain entry. The purpose of this identifying information is basically to verify that you own the original version of the digital asset. For example, although the same highlight video of Lebron James may be accessible to everyone on Youtube, the NFT is the original and authentic version of that video. So that means, if you own the NFT of the Lebron James video, you own the original video. And the identifying information in smart contracts basically verifies that you do indeed own the authentic one. Now, you may wonder, if everyone in the world can already see the Lebron James video, why would anyone pay money to own it? Well, NFT is kind of like fine art collecting. Take the example of Mona Lisa. Anyone can go to the museum to look at it or even just pull up a picture of it on the internet. Everyone has access to what the painting looks like. But the painting is still worth 100 million dollars. So NFT is kind of like the same thing. It’s like collecting digital art. Moreover, NFTs are tokens that have extra information stored inside their code. The extra information is what allows them to take the form of a digital asset (art, music, videos). And because these digital assets hold value, they can be bought and sold just like physical art. The value of the NFT is set by the market and the demand for the asset. The important part is that you own complete ownership of the original asset.
What’s the difference between a fungible and non-fungible token?
Bitcoin is an example of a fungible token and fungible tokens are divisible. By the way, if you want to learn more about Bitcoin, check out the video on the top right corner. Now. So back to the video. So what does it mean for Bitcoin to be divisible? Pretend Bitcoin is a whole pizza. You can split the pizza into many different pieces for many people to have a piece of it. Non-fungible tokens, like the NFTs, are not divisible. For example, pretend a NFT is an amusement park ticket. You can’t buy one ticket to an amusement park and split it into 4 parts for 4 people. It doesn’t work like that. If you rip a ticket into four pieces, that ticket no longer works.
Why are NFTs so special?
Non-fungible tokens can be used to differentiate digital assets to prove their value. They represent a lot of things such as land parcels or artworks or even songs! NFTs are not traded on standard cryptocurrency exchanges but are instead bought and sold on digital marketplaces like open bazaar or Decentraland’s LAND marketplace. To add on, anyone can sell NFTs. Especially for unpopular digital designers, it’s easier to get your artwork out and get more money. NFTs are extremely special because they unchangeably prove digital ownership. This is an important progression in the cryptocurrency world. The buyer of the NFT can sell it for more money if the value of the NFT rises.
Crypto Kitties
Now, you might be wondering, why am I talking about kitties on the internet? Well, Crypto Kitties collectibles were some of the first non-fungible tokens. Each blockchain-based digital kitten is unique. The point of the game is to collect lots of different digital tokens. Each digital kitten has its own design and you pay a type of currency to own it.
Key Takeaways
Non-fungible tokens or NFTs are digital assets that are unique and therefore created digital scarcity. They can’t be duplicated or divided.
There are many different types of NFTs including music, artwork, and in-game tokens.
NFTs are important because it’s a digital exchange area where you can actually get full ownership of a digital asset.
Owning an NFT is kind of like owning a piece of art.
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