A Non-Fungible Token is a unit of data stored on a blockchain, also known as a digital ledger.
What is a blockchain or a digital ledger?
It is something that certifies a digital asset to be unique (not interchangeable == non-fungible).
What is something that is fungible?
Something fungible is something, “of goods contracted for without an individual specimen being specified something able to replace or be replaced by another identical item; mutually interchangeable.”(1)
Toilet paper or copies of video games or movies are all fungible.
What is something non-fungible?
Something non-fungible is something that cannot be replaced by another identical item. An actual movie or game itself is something non-fungible. Non-fungibility is the cornerstone of NFTs being regarded as viable, worthwhile assets.
What are NFTs being used to do?
NFTs are being used to commodify digital assets in sports, music, entertainment, arts, and other aspects of what digitally exists.
What is commodification?
Commodification is the transformation of goods, services, ideas, nature, personal info, or people into commodities or objects of trade. At its most basic, a commodity is “anything intended for exchange.” (2)
How much is the market value of NFTs?
Currently more than a quarter of a billion dollars.
How do NFTs work?
Most are part of the Ethereum blockchain, meaning it is based on the second-largest cryptocurrency by market capitalization. Ethereum is the most actively used blockchain and is responsible for innovations that include NFTs, crowdfunding, games, gambling, and much more. Behoove us to say that this is not the article for or about blockchain itself, but this is an article about NFTs. Thus, let’s refocus by saying that most NFTs function with the Ethereum blockchain.
What, specifically, is an NFT?
A non-fungible token is something of a unit of data stored on a digital ledger, called a blockchain, that certifies the digital file is unique. NFTs are like cryptographic tokens, but they aren’t cryptographic fungibilities (not currency).
Each digital file is provided with a unique digital signature that is used to track NFT ownership. However, ownership of an NFT does not inherently grant copyright to whatever digital asset the token represents. Thus, while a person can sell an NFT representing their work, the buyer will not necessarily receive copyright privileges when ownership of the NFT is changed and so the original owner is allowed to create more NFTs of the same work. In such a sense, an NFT is merely proof of ownership and is separate from copyright/intellectual property.
Some Types of NFTs
Artworks: NFTs of artworks are similar to autographed items. See some of the top-selling NFTs of 2021 here!
Collectibles: NFTs can also represent collectibles, similar to card collectibles (like sports or Pokemon cards).
Games and in-game assets: some NFTs are in game assets, such as plots of digital land or unique items.
Music: NFTs generated about $25M in revenue in 2021 alone.
Film: there are exciting applications in film, although the film industry has been generally very slow.
Other Applications: Fashion, Sports, University Research, and even Porn.