What Are Non-Fungible Token (NFT)?
A Non-Fungible Token (NFT) is a token that cannot be exchanged for one another. Non-fungible tokens, also known as NFT, are cryptographic units of data or assets stored on a blockchain with unique identifications that distinguish them from each other and make them not exchangeable.
Fungible means “CAN be exchanged with another identical item.” A typical example is a currency; $10 will always be $10, even two $5 bills. They remain fungible regardless of the bill’s condition.
But what about a $10 bill signed by Elon Musk? Now we’re getting into the idea of non-fungible. Non-fungible means something is unique and can’t be exchanged. The website domain blockchainreporter.net, there can only be one of blockchainreporter.net, and it can never be changed because it’s unique, one of a kind.
Understanding Non-Fungible Tokens (NFTs)
A non-fungible token might be similar to cryptocurrency since it can also be traded, except that the non-fungible tokens paradigm is different from crypto. Non-fungible tokens are unique and irreplaceable, making it impossible for one non-fungible token to be exact or equal to another. Non-fungible tokens are digital representations of assets and have been similar to the form of digital passports because each non-fungible token always contains a unique, non-transferable identity to differentiate it from other tokens. Non-fungible tokens can also be extensible. That is, one non-fungible token could be bred. You can combine one Non-fungible token with another to produce a third unique non-fungible token.
Non-fungible tokens are used as proof of ownership of underlying assets. They can also be used to represent digital art. An example is CryptoKitties, an extremely popular digital representation of cats with unique identification based on the Ethereum blockchain. It is associated with unique images of cartoon cats and allows users to trade those cats by exchanging complimentary tokens.
Although non-fungible tokens might only be considered art, it’s not. Non-fungible tokens are more than just a bunch of digital arts. They could also represent other types of digital assets. Such as; real-world items like real estate and even represent individuals’ identities, property rights, etc.
Because NFTs are developed on the blockchain, they can also work for identity management and remove the need for intermediaries. Non-fungible tokens can remove intermediaries, simplify transactions, and create new markets.
Examples of Non-fungible Tokens
Some other popular non-fungible token examples are:
Beeple is a digital art that happens to be the first-ever non-fungible token sold at a major auction house. This NFT was auctioned off by Christie for a whopping sum of $69 million.
Bored Ape non-fungible token or NFT is a digital art often also called Bored Ape Yacht Club (BAYC). This NFT collection is built on the Ethereum blockchain. Its collection features a photo of cartoon Apes that actually looks bored, some different than the other. Yuga Labs is the parent company of this NFT collection Bored Ape.
Memorabilia by actor William Shatner. This NFT collection contains photos of personal memorabilia from his sixty years career. The NFT was eventually sold, and the actor sold 125,000 units of the Memorabilia NFT in 9 minutes.
Another example of a non-fungible token is the one by singer and songwriter Grimes. Grimes made a whopping profit of $5.8 million, selling a collection of 10 of this NFT. This NFT is one of the top-selling NFT and was a one of a kind video called “Death of the Old” that sold for $389,000.
Non-fungible tokens are evolving, and it could also be an expansion for cryptocurrencies. Modern finance operations have issues with several complicated trading and loan systems for different asset types that they are dealing with, varying from real estate to lending contracts to artwork. But by using digital replicas of physical assets, Non-fungible tokens are a step forward in the innovation of this infrastructure.