Non-fungible tokens (NFTs) are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other.
Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. This differs from fungible tokens like cryptocurrencies, which are identical to each other and, therefore, can serve as a medium for commercial transactions.
What Does Non-Fungible Mean?
Fungibility is an economics term that describes the interchangeability of certain goods. For example, a barrel of oil is fungible (interchangeable/indistinguishable) from any other barrel of oil. A dollar bill, likewise, is equal to any other dollar bill (or 4 quarters, etc.).
Non-fungible is to render such items unique or distinguishable. For instance, if you were to take a dollar bill and have it drawn on and signed by a famous artist, it becomes unique – unlike all other dollar bills, and perhaps worth more than its face value.
What Are Some Examples of Non-Fungible Tokens?
Non-fungible tokens can digitally represent any asset, including online-only assets like digital artwork and real assets such as real estate. Other examples of the assets that NFTs can represent include in-game items like avatars, digital and non-digital collectibles, domain names, and event tickets.
Important characteristics of NFTs
1. NFTs (non-fungible tokens) are unique cryptographic tokens that exist on a blockchain and cannot be replicated.
2. NFTs can represent real-world items like artwork and real estate.
3. “Tokenizing” these real-world tangible assets makes buying, selling, and trading them more efficient while reducing the probability of fraud.
4. NFTs can also function to represent individuals’ identities, property rights, and more.
Why are NFTs Important?
Non-fungible tokens are an evolution of the relatively simple concept of cryptocurrencies. Modern finance systems consist of sophisticated trading and loan systems for different asset types, ranging from real estate to lending contracts to artwork. By enabling digital representations of physical assets, NFTs are a step forward in the reinvention of this infrastructure.
To be sure, the idea of digital representations of physical assets is not novel nor is the use of unique identification. However, when these concepts are combined with the benefits of a tamper-resistant blockchain of smart contracts, they become a potent force for change.
How Can I Buy NFTs?
Many NFTs can only be purchased with Ether, so owning some of this cryptocurrency—and storing it in a digital wallet—is usually the first step. You can then purchase NFTs via any of the online NFT marketplaces, including OpenSea, Rarible, and SuperRare.
Conclusion:
The most exciting possibility for NFTs lies in the creation of new markets and forms of investment.
