What is an NFTs

  • Stand for non-fungible tokens and they are one of the types of cryptographic tokens that can represent ownership of digitally scarce goods such as pieces of art or collectibles 
  • non-fungible is not a very popular word so let’s see what it really means 
  • in economics fungibility is the characteristic of goods or commodities where each individual unit is interchangeable and indistinguishable from each other 
  • the idea of fungibility, which is defined as “able to replace or be replaced by another identical item”.
  • like with most concepts fungibility is best explained with an example fiat money such as the us dollar is a good example of something fungible if Alice has a five dollar banknote she can replace her banknote with bob’s five dollar banknote without this affecting Alice or bob 
  • on the other hand Alice’s Favorite limited edition basketball card is a good example of something non-fungible each card is treated as a collectible and has individual properties a card with one player doesn’t usually have the same value as a card with another player on top of that even when considering two exactly the same cards other factors such as the year of production or how the card is preserved can make a difference
  • an extreme example of something non-fungible is a piece of art a painting for example is usually created as only one original copy 
  • now as we know what non-fungible actually means let’s see what the most common properties of nfts are unique each nft has different properties that are usually stored in the token’s metadata provably scarce there is usually a limited number of nfts with an extreme example of having only one copy the number of tokens can be verified on the blockchain hence its probability indivisible 
  • most nfts cannot be split into smaller denominations so you cannot buy or transfer a fraction of your nft 
  • similarly to standard tokens nfts also guarantee the ownership of the asset are easily transferable and are fraud proof 
  • although nfts can be implemented on any blockchain that supports smart contract programming the most noticeable examples are erc721 and ERC-1155 standards on Ethereum before we get into the nft standards