You might already know NFT stands for Non-Fungible Token, but do you know what a token is? Let’s start here.
A token is a digital representation of assets that exist or run on top of an existing coin — blockchain.
These assets can be houses, paintings, art, game characters, or even gold.
Imagine physical assets hosted digitally on a blockchain, that’s where NFTs come in.
An NFT is formed by converting a digital asset to a unique digital signature.
This signature is what defines the ownership of that asset.
NFTs can be bought and sold for real money or cryptocurrency.
But before you can fully understand non-fungible tokens, you need to understand fungible tokens.
Fungible tokens are interchangeable tokens and can be divided into smaller units to form the same value.
For example, a $100 bill can be exchanged for five $20 bills.
The same goes for trading a unit of Bitcoin for an equal unit in Ethereum cryptocurrency.
Non-fungible tokens are not interchangeable and cannot be divided into smaller units or even exchanged for another NFT.
Each NFT represents a unique asset owned by a specific person.
Even if an NFT is copied, it’d not be authentic.
I’ll show you why in the next paragraph.
Content of NFTs
An NFT contains clear information of:
Owner — Specific person that created this asset originally.
Seller(s) — Individuals that have bought this asset since its creation.
This information serves as proof of an NFT’s originality.
It’s easily verifiable, hence making it impossible to forge NFTs.
Are NFTs worth it?
NFTs are a major economic innovation because they allow creatives anywhere in the world to share and receive payment for their work.
Jack Dorsey — Twitter ex-CEO, sold a digital version of his first tweet for more than $2.9 million.
Mike Winkelmann, known professionally as Beeple, sold a digital work of art for $69.3 million at Christie’s in 2021.
The work is a collage of 5000 digital images for his Everydays series.
Hopefully, you’ve learned about NFTs, here’s something to test your knowledge on the topic.
What makes an item non-fungible?
Exchangeability
Unique digital signature
Tradability
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