What are NFTs? A look at Non-fungible Tokens and Why They Matter
Updated: Aug 4, 2022
So, you've heard about non-fungible tokens (NFTs) and how they're going to change the world. You might have also heard that there is a lot of confusing terminology in this space. Are NFTs a cryptocurrency or an asset? Do people buy them as collectibles, or do they use them as part of their everyday lives? What's the difference between fungible and non-fungible? And how exactly do they work? Well, we'll try to break down some of that confusion for you within this article!
What does NFT stand for?
NFT stands for Non-Fungible Token."
What are NFTs exactly?
NFTs are digital assets. They don't always have a real-world equivalent, but they can be used to represent a physical asset. For example, if you own a digital painting by Picasso or Monet, the artwork itself is an NFT—but you don't own it in the same way that you would if you had bought it from a gallery.
NFTs can be represented as an image, sound or video file; they could also be represented as data stored on the blockchain (think: Bitcoin).
NFTs can be used in many ways: you could exchange them for goods or services; you could trade them on exchanges; you could use them as part of a crowdfunding campaign or ICO; they could represent ownership over real estate property titles and much more.
What is the difference between fungible and non-fungible?
In the world of digital assets, there are two types: fungible and non-fungible.
Fungible means it can be substituted for another object or substance with little to no difference in value. Essentially, if a token is fungible, it means there's no difference between one unit and another. For example, if you have 20 USD in your bank account and someone gives you 20 USD more, now there are 40 units of USD in total - but they're all just "USD". There's no way to differentiate between the one that was originally in your bank account and the one you just received.
Non-fungible tokens on the other hand are unique and cannot be duplicated.
How do NFTs work?
NFTs are created on blockchain networks such as Ethereum's network, where they're usually used to represent ownership over any kind of asset including physical goods like cars and houses, music albums and video games respectively.
Because they are created on the blockchain, which acts as the registry and timestamping system for when each NFT was created or transferred between owners, they are immutable - meaning they cannot be changed. Nobody can take away your ownership of an NFT or make another one exactly like it. Additionally, because they are "permissionless," anyone can make, buy, or sell an NFT without needing permission. Last but not least, each NFT is unique and may only be owned by one individual at a time.
Why do people buy and sell NFTs?
NFTs are purchased for many reasons. First of all, NFTs present an easy way to own digital assets and can be used as collectibles, emblems, or proofs of ownership of items like artworks or branded clothing lines. You can also use them as a means of payment for goods and services.
Some people also view NFTs as investments that they can gather and sell, while some others simply adore the art and technology behind NFTs and enjoy experimenting with their applications.
NFTs are increasingly being seen as a method to launch new products, raise money, and give marginalized communities a voice. There is a feeling that NFTs may be the key to a brand-new democracy.
What is the most expensive NFT to date?
The Merge is one of the most expensive NFTs ever sold. It was sold in December of 2021 for a staggering $91.8 million.
The Merge was created by well-known digital artist Pak, whose works have fetched him more than $350 million in earnings. It was purchased for around $92 million by 28,983 participants who contributed a total of 312,000 shares (each of which is an NFT).
Given that the initial cost of each of the NFT pieces was $575 and then increased by $25 every six hours, that is quite astounding. In the end, The Merge has elevated Pak beyond Jeff Koon's Rabbit from 1986, which sold for $91 million, to become the most valuable living artist in history.
NFTs are a big deal, and they’re only just getting started. This technology is going to change the way we interact in ways that we can’t even imagine yet. If you are a business owner looking to learn more about NFTs and other Web3 technologies and how you can leverage them for your business, join the Blaze Mastermind Membership by downloading the TablexTribe app today and learn from our Founder, Casey Ariel, as well as our community of experts in the Web3 space.