What are Non-Fungible Tokens (NFTs) and How Do They Work?

Non-fungible tokens (NFTs) are a new type of cryptocurrency that can represent digital or physical assets. Unlike traditional tokens like Bitcoin, each NFT is unique and non-interchangeable. This means that if you own one NFT, you can’t trade it for another NFT owned by someone else, even if they’re both identical in every other way.

Understanding NFTs

An NFT is a digital token that represents ownership of a digital item. For example, if you own a percentage of an oil painting on the blockchain, you can sell your share when the painting is sold through an auction house created by blockchain technology like Artory. NFTs are typically used to collect and own unique digital items like art, trading cards, or other digital assets.

The Use Cases for such cryptocurrency (digital or physical assets)

There are many kinds of uses for NFTs beyond art. In fact, some people are already buying real estate with them! NFTs can be used to represent digital items, such as virtual collectibles and in-game assets. They’re also used to represent physical items in some cases (like art or real estate). The most popular NFTs are ERC-721 tokens, which are used for tracking ownership of unique digital items on the Ethereum blockchain.

Fungibility and NFTs

Fungibility is a measure of the interchangeability of two units of a commodity. It’s important in financial systems because if one unit of currency is no different from any other unit, it becomes easier to trade goods and services without having to worry about valuing them in terms of an arbitrary medium. NFTs are unique and non-interchangeable tokens on the blockchain, which means you can’t trade one NFT for another.

Scarcity and Value of Non-fungible tokens

Because of their scarcity, owners of rare or valuable NFTs can sell them for huge sums of money. The most expensive NFT is CryptoKitties, a blockchain-based game where users breed digital cats and sell them as collectibles. The most expensive cat was sold for $140k. The rapid growth in the use and application of NFTs in recent times such as representing real estate, voting rights, identity ownership, tickets, and many more markets is indicative of their potential to reshape how we exchange value over the internet.

In summary, Non-Fungible Tokens are a special kind of crypto-asset that helps track ownership and authenticity. They are unique, non-interchangeable tokens on the blockchain that represent ownership of digital items, such as art, trading cards, or other digital assets. NFTs offer a number of benefits over other forms of digital goods because they are unique and can’t be exchanged for one another. The potential for NFTs to reshape how we exchange value over the internet is significant, and we are only just beginning to scratch the surface of what is possible with this technology. If you have any questions about NFTs or want to learn more about how this technology can benefit your business or organisation, please contact us today.