What Is a Non-Fungible Token: NFTs Explained.
With all this hype around crypto, and Non-Fungible Tokens it can get confusing trying to understand what is what, with so many different projects being thrown in your face at once. It’s like the whole world is all looking at this moving train waiting for their opportunity to jump in…
The truth is, it’s new for EVERYONE. If you have gotten this far (trying to understand what the hell a Non-Fungible Token even is) you are doing fine! That being said, my goal with this article is to do my best and explain what a Non-Fungible Token is. You’ve decided to take the “red pill”
“You take the red pill, you stay in wonderland, and I show you how deep the rabbit hole goes.”
See this collage of images? This was sold for more than $69 million as a Non-Fungible Token on the Blockchain. Non-Fungible Tokens or NFTs have gotten so much attention this past year, but there are still so many people out there asking what a Non-Fungible Token is? How can an image or video that I can download for free have such insane worth?
Also Check; Most Anticipated NFT Games
Let’s Break it Down.
There are two phrases you need to understand before we get started. The first is Non-Fungible, and the second is Token. By definition, something that is fungible is anything that can be exchanged or replaced for something of equal value.
Let’s start with a real-world example. Say I have a $100 bill, I would have no problem exchanging it for any other $100 bill because they both represent the same value and therefore are considered fungible. Likewise, I can exchange my gold for anyone’s gold of the same quantity because the value remains the same.
Things work similarly in the digital world. I can exchange my bitcoin or Ethereum for your bitcoin or Ethereum as long as its the same quantity because we agree that both are interchangeable, exchangeable, and Fungible.
Now the Non-Fungible is as simple as this: the painting of Monalisa is one of a kind and can’t be exchanged for another because no other artwork matches the worth of it, making it Non-Fungible.
Imagine this, Nathan and Emma each have a $100 bill. Could they trade $100 bills and still have the same amount of money? Of course, because both bills have the same worth and are interchangeable with each other. Let’s change the scenario, and say Emma gets an autograph from her favorite singer on her $100 bill.
Now, if Nathan asks her to trade, would she still do it? No, probably not, because the autograph has made the bill unique and is now one of a kind, making the signed bill a Non-Fungible Token.
Now for the second word, Token. What is a token? Before understanding token we need to understand the Blockchain. Think of a digital ledger that is publically accessible to everyone. We’ll use Emma and Nathan again in this example to make it as simple as possible. Say, Emma sends $500 to Nathan. The transaction is recorded in a digital ledger that both Emma and Nathan have copies of. Now imagine that instead of each being given their own copy of the transaction, it was on a public ledger instead, viewable by Emma and Nathan. Page Number (Contract address)
Page number of the Previous page (Address of the previous Block)
Who She received from
Who he is sending to
This page or block of information is chained to the previous block and makes a chain of blocks, almost like a social media feed. But instead of pictures of your friends babies, there is a feed of past transactions blocked together in a chain, known as the Blockchain. Blockchain transactions can not be altered or changed, and they are publically available to everyone at all times. This helps make assets unique and shows the ownership of the assets to everyone on the Blockchain.
Assets like NFTs ( Non-Fungible Token )
Let’s use that autographed $100 bill as a reference again. Say Emma takes a picture of that $100 bill and then mints the picture into a token on a site like opensea.io . Minting a token means that the image of that $100 bill is now associated with an ownership certificate on the Blockchain, making the autographed bill a publically verifiable property. By doing this Emma’s $100 bill is now considered a Non-Fungible Token.
Now that we have a general understanding of what NFTs are, we can start learn how we trade them and why they are so valuable.
The “scarcity – desirability” scale decides an NFTs value.
Cryptocurrencies and NFTs are revolutionizing the traditional centralized financial systems by rooting out almost all their problem with a single solution.
In this digital era, we face continued issues with authenticity and verification of digital files, where they originated, and who their creator was. The Blockchain makes everything transparent, from creation to the current date.
Once the transaction is recorded on the Blockchain, the ownership is then transferred publically to its new owner. Like transferring the title of a car to a new owner…Except there is no car. Just a Non-Fungible Token(NFT).
There are many kinds of NFTs :
Music and media
The most popular of these so far are Art and Gaming NFTs. We understand the Art NFTs as paintings presented as digital assets. However, Gaming NFTs are different. These blockchain games have assets used as NFTs. In traditional games, there are options to unlock characters and skins like a new weapon or outfit in Call of Duty. You own the assets within their game. You cannot use those assets in another game, nor do you own those assets outside the game.
Blockchain games are different. If you unlock an asset, it is turned into an NFT and can be used in other blockchain games. Even if the game decides to shut down its servers, you still own those assets and can trade those like any other NFT.
Example Of How Non-Fungible Tokens are usually Presented.
Quantity that exists
The quantity that exists
Who owns the first series released
The technology behind NFTs and the Blockchain is amazing and will continue to change our world in ways people cannot begin to imagine.