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NFTs (non-fungible tokens) might be the most confusing commodity on the internet right now. At its most basic, an NFT is computer code that represents ownership of digital items. But what does that actually mean?
NFTs are Non-Fungible Tokens, unique and unchangeable crypto tokens that are stored on a blockchain to represent the ownership of a digital or physical asset. NFTs can represent any number of things, including images, videos, and audio files.
NFTs are different from physical currencies and bitcoin because they’re non-fungible.
In the most basic terms, this means every NFT has a completely unique value and can’t be easily traded or bartered for another NFT (unless both parties involved decide they share the same value, which probably never happens).
1 NFT does not automatically equal 1 other NFT. They can have vastly different values, which are completely subjective and unique to that specific NFT.
If I ordered a custom birthday cake for my friend, I can’t go back to the bakery and exchange it for a different cake, because the cake I have is unique. Similarly, if I am the owner of an NFT, I have a unique digital item that cannot be replaced with an identical one.
Why does any of this even matter, you ask? Well, it’s what makes each NFT a unique collectible item that actually holds value. How much value, exactly? That varies widely. An NFT can represent the ownership of anything from a GIF file (yes, some of those are actually owned by people), a piece of artwork, a video game element like a character or costume, or even a plot of real estate.
What’s the Point in NFTs?
Advocates believe NFTs allow creators to retain the ownership and profitability of their content while creating additional value for customers. For example, NFTs allow customers to resell the content they purchase. NFTs are meant to bring the concepts of scarcity and proof of ownership to digital items, and various uses are being developed that use these properties.
Critics think NFTs are pointless because they fail to protect creators from content theft and buyers from scams. NFTs may not legally transfer rights of ownership or copyrights, either, and some critics do not believe scarcity and proof of ownership are possible with digital content.
Unique Asset Ownership
Each NFT represents a single digital or physical asset, and most NFTs only have a single owner at a time. Ownership of an NFT is secured and traceable because it’s recorded on a blockchain (the Ethereum blockchain for most NFTs).
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