What are NFTs or Non-Fungible Tokens?
An NFT or Non-Fungible Token is a token that is not replaceable by another token. The main difference between an NFT and another token on a blockchain is that an NFT is not fungible and not divisible (non-fungible and indivisible).
The world Fungible means that one could replace it with the exact item/product. So, for example, Bitcoin is a fungible token, for the mere fact that you can trade it for another bitcoin. And it does not matter which particular bitcoin you have in your possession, as they all have the same value.
Non-fungible means that the item is unique and cannot be replaced with the exact same item. Something like owning the Mona Lisa and knowing that it’s the only one in the world as there is only one of it (and that any other thing that looks like it is a copy). Fungibility is a characteristic of currencies and cryptocurrencies.
NFTs are also indivisible, which means that they cannot be divided into smaller parts. You could transfer 0.0000001BTC or split 1 ETH into 0.5ETH and 0.5ETH. An NFT cannot be divided, in the same way, you could not divide a painting without destroying it.
How does a NFT work?
NFTs exist on the blockchain, which is a decentralized public ledger that holds records of transactions.
Although NFTs were first created on the Ethereum Blockchain, many other blockchains also support NFTs as well.
NFTs can be created or “minted” from digital objects that represent tangible or non-tangible products. These products can include art pieces, video highlights, GIFs, video game skins, or music.
For example, the very first tweet by the CEO of Twitter, Jack Dorsey, was sold for $2.9 Million dollars. If you were to purchase that NFT, everyone on the blockchain will be able to see who owns this piece of history and the amount that was paid for it.
Every NFTs has a unique identifier, and this allows the owner of the NFT to prove ownership. Since an NFT is recorded and verified on the blockchain, this means that it is immutable, and no one can manipulate the record of its ownership.
History of NFTs
In 2017, the Ethereum-based game Crypto Kitties introduced NFTs to the world. Crypto Kitties enable players to buy, breed and trade limited edition virtual cats. The game developers allowed users to win in-game items like digital swords, shields, and more. And with tokenization of game assets, allows the transfer of these assets to different players or even into different games.
Besides game collectables, NFTs are also used to sell a wide range of virtual collectables like NBA virtual trading cards, art pieces, and video clips.
Where can I get NFTs?
Buying NFTs is not as hard as it seems. There are websites out there that enable a potential buyer to see the current market trends for NFTs, what is being sold, and how much.
If you are an artist or a creator and you are looking to create an NFT of your own, it is not hard as well. Websites like Rarible and Opensea enable users to create, sell, and buy NFTs.
The future of NFTs
With blockchain and crypto becoming more mainstream, there might be a space for NFT-based artwork to hold value and be traded on the open market. Just in the first half of 2021, the NFT space transacted more than $2.5 billion dollars and more and more people are buying and selling NFTs as an investment.
More creators and platforms are also entering into the NFT space. This means that the number of NFT works will grow at an ever-increasing pace, bringing more participants – buyers, creators, platforms, and developers into the ecosystem.
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