What is an NFT? What are Non-Fungible Tokens (NFTs)?


NFTs are digital assets that can be assigned a unique identifier and are non-fungible. Non-fungible tokens are not interchangeable with other tokens because each token has its own unique attributes or properties. Non-Fungible Tokens are distinct from Fungible Tokens. Fungible tokens can be substituted for one another, like the dollar bill as a currency where all dollar bills have the same value. On the other hand, NFTs have their own distinct properties and cannot be substituted for one another. Let’s explore in detail — NFT stands for ‘Non-Fungible Token’. In the world of cryptocurrencies, fungibility is something that refers to the interchangeability of units of a given currency or asset. For example, every single dollar bill is identical to every other dollar bill; they are all equivalent and interchangeable. That’s why we call them fungible assets instead of non-fungible ones. An NFT, on the other hand, is not interchangeable with others — rather, it’s an asset that can only be used once and represents a particular individual or entity (such as your friend Peach


What makes a token ‘non-fungible’?

Fungibility is the quality of a good or a commodity whose individual units are interchangeable. For example, one barrel of crude oil is identical to any other barrel of crude oil. Non-fungible tokens are distinct from one another because they each have different properties. They cannot be substituted for one another, and they can be traded, sold, or broken apart unlike fungible tokens.


Why do we need non-fungible tokens?

Fungible tokens, such as Ethereum, are interchangeable units that can be broken down into smaller units. However, it is not possible to break down non-fungible tokens into smaller units or combine them to create larger units. Non-fungible tokens are used for specific digital assets such as an artwork, a ticket for an event, or a collectible item. They are used for trading assets that have their own distinct properties (such as an era of music, an artist, etc.).


How are NFTs different from other tokens?

NFTs are different from other tokens such as utility, security, or equity tokens. Utility Tokens are used to access a product or service such as a decentralized ride-hailing app. Security Tokens are used to represent ownership in companies. Equity Tokens represent a stake in a company and are similar to stocks. NFTs are not interchangeable with one another. They only represent one particular piece of art or one specific tokenized item.


NFT characteristics and benefits

- Transparency - Blockchain technology allows for complete transparency and traceability of the supply chain and product journey. - Reducing fraud - The decentralized nature of blockchain means that there is no central authority who can tamper with or modify the record. - Preventing counterfeiting - With the distributed ledger, you can trace every piece of merchandise and ensure that every item is genuine. - Accessibility - Because the records are publicly available, anyone can view them. This means that you can also provide customer service and track customer complaints. - Security - The decentralized nature of blockchain means that there is no central authority who can tam-per with or modify the record.


Conclusion

NFTs are digital assets that can be assigned a unique identifier and are non-fungible. They are distinct from one another because they each have their own distinct properties. They are used for representing one particular piece of art or one specific tokenized item. NFTs are used for trading assets that have their own distinct properties. However, NFTs have a number of benefits such as transparency, reduced fraud, reduced counterfeiting, accessibility, and security.