What is an NFT?

Apr 28, 2024 1:13:57 AM

NFT is an acronym for Non-Fungible Token. We have already seen that fungibility is the attribute that allows an asset to be mixed with another asset of the same type. For example, banknotes and coins of the same value are fungible because they can be freely exchanged. Non-fungible tokens are those unique to their kind.

Let’s think of a sticker album; the stickers are non-fungible, as each represents a particular item in the album. Artworks are also non-fungible, since it is not possible that two artworks be exactly alike. NFTs are based on the same idea in the context of blockchains.

The idea of non-fungible tokens is not new, but its use began to become popular with the launch of the game CryptoKitties, on Ethereum. In the game, it is possible to own and breed virtual kittens, each with its own characteristics. As all kittens are unique, they are not fungible, and each kitten is represented by a unique NFT.

NFTs can represent digital works of art, especially those involving collections. One of the most famous collections is the Bored Ape Yacht Club, where each Bored Ape is an NFT. Holders of any NFT in the collection are allowed to access restricted spaces on a website. In fact, one of the most successful NFTs use cases is in the access authorization to some place, event, or content.

Other recent uses of NFTs are to represent characters in a particular game, pieces of land in a virtual terrain, or items in a metaverse. The advantage of using NFTs to represent such virtual assets is that the blockchain guarantees their integrity and authenticity. While ownership of items in a centralized game is only guaranteed by the company producing the game, ownership of an NFT is certified by the transparency of the blockchain.

It should be understood that owning a NFT is nothing more than owning a non-fungible token in a smart contract. In the case of digital art, the image itself is generally not recorded on the blockchain. Only the record of where such an image can be found is stored in it. The blockchain guarantees that you are the right holder of that item; however, there is no legal regulation in this regard.

NFTs are usually traded on NFT marketplaces, decentralized applications on the Internet where anyone can sell or auction their NFT. An example of an NFT market on Ethereum is OpenSea, while an example of an NFT market on Neo is Ghostmarket.