Non-Fungible Token (NFT) Definition
What Is a Non-Fungible Token (NFT)?
Non-fungible tokens or NFTs are cryptographic assets on blockchain with unique identification codes and metadata that distinguish them from each other. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. This differs from fungible tokens like cryptocurrencies, which are identical to each other and, therefore, can be used as a medium for commercial transactions.
WHAT YOU NEED TO KNOW
- NFTs are unique cryptographic tokens that exist on a blockchain and cannot be replicated.
- NFTs can be used to represent real-world items like artwork and real-estate.
- “Tokeninzing” these real-world tangible assets allows them to be bought, sold, and traded more efficiently while reducing the probability of fraud.
- NFTs can also be used to represent peoples identities, property rights, and more.
The distinct construction of each NFT has the potential for several use cases. For example, they are an ideal vehicle to digitally represent physical assets like real estate and artwork. Because they are based on blockchains, NFTs can also be used to remove intermediaries and connect artists with audiences or for identity management. NFTs can remove intermediaries, simplify transactions, and create new markets.
Much of the current market for NFTs is centered around collectibles, such as digital artwork, sports cards, and rarities. Perhaps the most hyped space is NBA Top Shot, a place to collect non-fungible tokenized NBA moments in a digital card form. Some of these cards have sold for millions of dollars.2 Recently, Twitter CEO, Jack Dorsey, tweeted a link to a tokenized version of the first tweet ever written where he wrote “just setting up my twttr.” The NFT version of the first-ever tweet has already been bid up to $2.5 million.3