What Are NFTs?
Updated: Feb 26
NFT stands for “non-fungible token,” meaning a tradable, but not copyable, unit of data stored on a digital ledger called a blockchain. An NFT can theoretically be almost any kind of digital asset—a song, a gif, a photograph, a painting, even a tweet--as long as it’s non-fungible. The question of what assets, digital or otherwise, are fungible vs. non-fungible can be complex. But put in the simplest of terms:
Fungibility generally refers to "the ability of a good or asset to be interchanged with other individual goods or assets of the same type." Assets commonly used to exemplify the concept of "fungibility" include paper money (e.g., a $20 bill or 1,000 yen note), gold and other precious metals, and even cryptocurrency like Bitcoin and Ether. The key word here is "interchangeable." The $1 bill in my pocket is interchangeable with the $1 bill in your pocket. If we exchange them, neither of us will have lost or gained any value.
Non-fungible assets, on the other hand, are characterized by their lack of interchangeability because "each unit has unique qualities that add or subtract value." Real estate, used cars, diamonds, and artwork are all assets often used to exemplify this principle. For instance, if I donate one of my paintings to a local art exhibit, they can't give me back a different painting when the exhibit ends. Each painting is unique and has different subjective and objective value, so my painting can't be swapped out for another one without me either gaining or losing value.
So what about a token then? When used in the context of NFTs, token refers specifically to "crypto tokens" or "cryptocurrency tokens." Crypto tokens represent digital assets stored on a blockchain, usually the Ethereum blockchain, that use cryptographic values unique to their identity (kind of like a serial code on a physical product). Crypto tokens can represent either fungible assets (e.g., Bitcoin, Ethereum, other cryptocurrencies) or non-fungible assets. So, when the token represents a non-fungible asset, it's called a non-fungible token.
To create an NFT, you'd start by creating the asset you want to tokenize (e.g., record a song, take a photo, create a piece of digital art), save a copy of the asset digitally (e.g., as a MP3, JPG, or GIF), and record and validate the information into the blockchain, also called “minting.” Once minted, NFTs can be sold and resold on popular platforms that include OpenSea, Rarible, SuperRare, Nifty Gateway...Foundation, VIV3, BakerySwap, Axie Marketplace and NFT ShowRoom.
To purchase and sell NFTs on these platforms, you'll need a digital wallet and cryptocurrency in that wallet to cover the transaction or "gas" fees associated with minting, selling, and/or purchasing NFTs. Metamask and Coinbase are two wallets that you can create and use to store cryptocurrency and other crypto assets, like NFTs that you've purchased or created.
There is much more to learn when it comes to the world of cryptocurrency, blockchain and Web3 technology, and NFTs. More information about these topics and different theories and perspectives on their longterm implications and potential viability can be found everywhere from platforms like Time Magazine and The Harvard Business Review to forums like Reddit, Twitter, Discord, and Homebase.