What Is an NFT? Your Guide to Non-Fungible Tokens in 2023.
Learn how NFTs work, what they’re worth, and why it matters.
NFTs are digital assets that are stored on a blockchain. They represent various forms of digital content and may even be tethered to physical assets. Ownership of these assets is recorded in the blockchain, creating an immutable record that enables the selling and trading of NFTs. If you are not yet familiar with blockchain technology, you can learn the basics in the article What Is a Blockchain Developer (and How Do I Become One?) and browse the glossary of terms at the bottom of this page.
What does NFT stand for?
NFT stands for non-fungible token. Although non-fungible tokens are widely regarded as a new technology, the first NFT was minted in 2014 by digital artist Kevin McCoy and tech entrepreneur Anil Dash. You can trace the origins of NFTs even further back to 2012 when Meni Rosenfeld published the “Colored Coins” whitepaper. “Colored Coins” describes the methodology for representing and managing the ownership of real-world assets on a blockchain .
What does non-fungible mean?
The term “non-fungible” is not limited to the NFT space. It is also used to describe assets in law, crypto wallet may make money finance, or commerce that are difficult to exchange with similar goods. In other words, non-fungible assets are unique. You cannot replace them with similar items. Diamonds are a great non-digital example of a non-fungible good. Many different cuts, NFT grades, and styles of diamonds exist. These qualities make them unique and non-interchangeable with other diamonds.
Non-fungible vs. fungible.
In contrast, bills in US currency are an example of a fungible good. You can exchange one $50 bill for five $10 bills or two $20 bills and two $5 bills. Anything that is mutually interchangeable can be described as fungible. Fungible goods are easily replaced with items of identical or invest in nft practically identical value.
What is a non-fungible token ?
A non-fungible token is a digital identifier recorded in the blockchain. It cannot be copied, substituted, or changed. Non-fungible tokens validate the authenticity and ownership of a digital asset. Essentially, a non-fungible token is proof of ownership. This type of certificate is digital and cannot be altered due to the nature of blockchains.
What is an NFT?
NFTs are proof of an asset’s purchase. They are not the asset itself. These circumstances mean that you can create an NFT out of virtually anything. In addition to digital objects, you can use a digital object to represent a tangible item. Here are a few examples of things that can (and have been) turned into NFTs:
Digital content like video clips and social media posts Media files such as GIFs Video game items like avatars and NFT skins Digitized fashion such as NFT sneakers.
The difference between cryptocurrency and NFTs.
Despite their similarities, cryptocurrency and NFTs are not the same thing. Cryptocurrency is, however, a digital currency used for trading NFTs. The primary difference between cryptocurrency and NFTs lies in their value. The value of cryptocurrency depends on its utility, similar to the US dollar. If every merchant in the US decided to stop accepting US dollars, their value would plummet because they are purely economical. NFTs have both economic and non-economic value. Since an NFT can represent anything from artwork to a video game, cryptocurrency its value depends on factors like investors, collectors, and rarity.
Go deeper into NFTs and cryptocurrency and explore how the Metaverse will impact these and other industries in Meta’s What Is the Metaverse? course.