NFTs (non-fungible tokens) have become a popular – and somewhat controversial – addition to the blockchain world. With so many different information sources out there, it is hard to know what is accurate and what is not.
But what really are they, and what do they actually offer their buyers?
What is a Non-Fungible Token?
An NFT is a method of using a blockchain to create completely unique tokens, essentially meaning that each specific token can only be owned by a single person. Instead of owning a token, you are owning that token, and all of them are distinctly different entities.
The term fungible relates to anything that can be exchanged with no real difference. One dollar bill is the same as another dollar bill in terms of value, with the only major difference being their serial numbers and possibly the design on the note. No dollar bill has to be distinct or singled out.
A non-fungible token is the exact opposite. A one-of-a-kind deed to owning a house is non-fungible since nobody can own that exact same deed to that exact same house – and NFTs are a similar principle.
What are NFTs for?
Let us say you own something that is entirely unique (or something that is meant to be unique, even if copies are made by third parties). An NFT is a digital representation of that thing, like a deed saying that you own a piece of art or have a certain asset.
It is important to note that an NFT is not the item itself. An NFT is more like the token that represents it like a playing piece represents a player in a board game. While copies can be made of the original artwork or piece of music, the NFT owner still has the unique token, something that nobody else has.
To many people, this means that NFTs are essentially the same as a ‘license,’ proving that you are the original owner of a piece of content or an asset. It is not necessarily the same thing as having copyright or a trademark on that asset, but it acts as a digital footprint or watermark of ownership.
Why do NFTs have value?
Not all people see NFTs as valuable, but many do. NFTs have gained their own subculture and quite a widespread market, mostly because of the fact that the token itself is unique. The value of NFTs depends on what you personally see as important: it all focuses on the ownership of an asset.
Other than trademarking or copywriting an asset (which you can’t always do, depending on what the asset is), an NFT is a kind of ‘proof of ownership’ token. Somebody could still download an image that you own the token for, but they only have the visual image and none of the ownership.
NFTs have yet to reach their full potential or to get over hurdles like scammers who create NFTs of other people’s content, but the framework is already there. What are NFTs for? That is entirely up to how you want to use them and what kind of assets you might want ownership of.