As I have been exploring all things Blockchain and Crypto, I have been puzzled by non-fungible tokens, or NFTs. But then I found this free short course on decrypt.co found here. This short course has 10 parts and a quiz at the end. When completed and the quiz is passed you can mint your NFT certificate and store it in your digital wallet. Don’t worry if this is new to you as I will explain. But if you do take the course you will realize that I have borrowed some of their excellent material. The course goes much deeper and explains everything very well.
I started to understand what non-fungible tokens were when I realized what fungible tokens are. Fungible tokens are items that have value and are interchangeable, like a 20 dollar bill. One 20 dollar bill of the same currency has the same value as the next, they are interchangeable or fungible.
Non Fungible Tokens
A non fungible token or NFT, can not be exchanged for another, they are created unique and indivisible. NFTs can represent both tangible and intangible items. Basically, NFTs are pieces of code designed to carry out a set of instructions if certain conditions are met. This code is also known as a smart contract.
The information in the smart contract makes each NFT unique, and as such, they cannot be directly replaced by another token. They cannot be swapped like for like, as no two NFTs are alike. Your 20 dollar bill by contrast, is fungible. A 20 dollar bill in your wallet is no different from a 20 dollar bill in someone else’s wallet.
NFTs have another important attribute: they are not divisible, in the same way that you cannot send someone part of a concert ticket; part of a concert ticket wouldn’t be worth anything on its own and would not be redeemable.
How are NFTs Used?
Non-fungible tokens can be used for digital assets that need to be differentiated from each other in order to prove their value, or scarcity. They can represent everything from virtual land parcels to artworks, to ownership licenses. The token addresses are stored in your digital wallet. I use MetaMask for my digital wallet. The token and all the information that is part of the NTF token is located on a blockchain. I provide a overview of Blockchains here.
NTFs in the Future
Like a lot of new technologies, NTFs have been used for some really strange things to prove their worth. An Example is CryptoKitties. CryptoKitties is an online game where players buy, trade and breed adorable digital cats. Don’t take me wrong I am a cat person but I do prefer a cat that I can pet. Each CryptoKitty has one key difference, it is completely unique, represented on the blockchain by a NFT.
Buying, trading and breeding digital cats has demonstrated the many applications that NFTs can have in the future. There are many who believe that NFTs will be the way all contracts and non-fungible assets will be recorded, stored and transferred in the future.
As usual, I would welcome your comments and questions.