Non-Fungible Token Definition
NFT is the dark horse of assets. Mysteriously unique and eye-wateringly expensive. What is a non-fungible token, and why have NFTs been making headlines recently?
To start with, there are fungible and non-fungible assets.
Fungible assets are units that can be traded or exchanged against equal units. Fiat money or cryptocurrencies for that matter are all fungible assets.
Non-fungible tokens (NFTs) are unique in their singularity. An NFT cannot be exchanged against another security token as no equal unit simply exists.
Non-fungible token is a virtual representation of an asset. Each token contains a one-of-a-kind, non-transferable identity to distinguish it from all other tokens.
For more information about NFTs, we strongly recommend to have a look at an in-depth read that’s easy to find on our blog – What are NFTs?
What are NFTs About?
NFTs generally focus around collectibles. Examples include digital artwork, which can be anything from an image or GIF to a song or a video, (sports) cards, and other rarities.
Yes, you can freely copy or download anything digital, as many times as you like, but ownership is the question here. NFT grants you that.
How do NFTs Work?
For the sake of providing a brief yet comprehensive explanation – NFTs confirm an asset’s ownership by recording the details in a digital ledger – blockchain, obviously.
As blockchain is public and the data is stored on computers across the web, it’s impossible to lose or destroy the details.
It’s worth noting that most NFTs exist on the Ethereum blockchain.
How did it Start?
Blame CryptoKitties, the pioneer in Ethereum gaming and NFTs.
In essence, CryptoKitties is a game of breedable, collectible, and just plain cute furry friends. Each cat is unique and 100% owned by a user, meaning that it cannot be replicated, taken away, or destroyed.
What are the Pros?
NFTs are a bullet proof of the evolution of cryptocurrencies, and of the traditional financial system as well.
Just think about it. Digital representation of physical assets in the form of NFTs clearly reinvents the game.
The technology for NFTs was there already in the mid-2010s. However, the present NFT phenomenon is its technology and all the recent advancements and favorably factors combined.
Right. So if you’re asking yourself why NFTs exist, we say that they’ll greatly improve market efficiency by blurring the lines. Let us explain.
NFTs represent digital or physical artwork on a blockchain, which removes the need for intermediaries from the equation, thus allowing artists to connect directly with their audiences.
Another reason why is that each NFT has unique properties, which is exactly what identity management needs. If we’re talking about tokenization of artwork, that’s one thing. But if we think about NFTs as digital passports, that opens the different side of the token.
Finally, NTFs have created new opportunities in the market. And there’s no growth without innovation.
Thanks, but I’m Still a Crypto Person
Non-fungible tokens may not be for everyone. If you prefer to trade crypto in more traditional ways, there are still plenty of opportunities to explore.
Cue CoinMetro. We are an NFT in the vast crypto market.