NFTs, or "non-fungible tokens" took the crypto world by storm. You’ve probably seen them. Or at least heard about an NFT. And your interaction probably involved learning that they’re "pictures on the blockchain", and they "sell for millions".
But, there’s far more to NFTs.
- NFTs are tokens that can’t be “split”.
- NFTs can represent anything.
- NFTs aren’t just used for images.
What is an NFT?
A token is a cryptographic representation of something on the blockchain. It’s an abstraction of ownership. Secured cryptographically.
For example. If you go to a casino. You might exchange cash for chips, "tokens". The games there only accept these tokens. And the games all give away prizes. The casino owners make these tokens, and they prove someone has paid, and also allow them to manage the ‘economy’ of the fairground. This works because they’re not easily duplicated.
But. A nefarious criminal gang figures out how to make these tokens. And goes to the casino with bags of duplicate tokens. And plunders the casino. And, it’s impossible to tell them apart from the real ones!
Crypto-tokens, on the blockchain, cannot be defrauded. Unlike real-world tokens. Cryptographic tokens create ‘digital scarcity’.
Fungibility is a measure of how easily interchangeable something is. For example, a $5 note is not particularly fungible. Because you can’t tear it in half to make 2 x $2.50 notes.
However, a lump of gold is fungible. You can scrape atoms of it, and that’s its limit of fungibility.
Non-fungible tokens are cryptographically-secured, non "split-able" tokens.
Why do NFTs cost so much?
NFTs, often cost a lot due to scarcity.
Many are limited. Many are unique. And this is what is important.
NFTs are digital assets with proven scarcity.
You can’t just "copy" an NFT. You must own the token.
What are NFTs used for?
Many artists store links to digital media on NFTs. Images. GIFs. Movies. And they’re selling them for huge amounts of money.
NFTs can be used for pretty much anything.
The can be used for storing:
- medical information;
Any data reference can be stored on an NFT provided the storage space is large enough.
The production of the NFTs is what makes them so special.
Usually, digital intangibles can be copied indefinitely. But, NFTs (the ownership tokens) cannot be copied. They are proveably unique.