What are NFTs

NFT - Non-Fungible Token

An NFT (non-fungible token) is a unique digital item stored on a blockchain. NFTs can represent almost anything, and serve as a digital record of ownership.

Fungible vs. non-fungible

Before we dive into NFTs, it’s important to understand the “non-fungible” part of “non-fungible token.” When an item is fungible, it means it’s interchangeable with another of the same item. A classic example is a $1 dollar bill you could swap dollars with someone and you’d both still have $1.

Non-fungible, on the other hand, means the item is totally unique, and therefore has its own unique value. For example, two cars of the same make and model might have different values based on how many miles are on the odometer, their accident records, or if it was previously owned by a celebrity.

How do NFTs work?

NFTs operate on blockchain technology. The blockchain is basically a large, digital, public record. The most popular blockchains are distributed across many nodes, which is why you’ll hear them described as “decentralized.”

So instead of a central company-owned server, the blockchain is distributed across a peer-to-peer network. Not only does this ensure that the blockchain remains immutable, it also allows the node operators to earn money, instead of a single company. Because the blockchain records and preserves history, it is uniquely positioned to transform provable authenticity and digital ownership.

When someone creates, transfers, buys, sells, or otherwise does something with an NFT, that all gets recorded on the blockchain. This is what enables authentication.
This record serves as a permanent statement of authenticity that can be viewed or accessed by anyone. Today, when you buy a piece of art or a collector's item, it typically comes with a paper certificate of authenticity, which you must then keep track of forever. It is easily forgotten, lost or destroyed, creating a very fragile system for authenticity. Blockchain’s offer a simple and more secure solution to this long standing issue of proving authenticity.

NFTs can establish which items are authentic and which are not. The impact of NFT technology Blockchain technology is revolutionary for digital items. With NFTs, digital items can be provably scarce, openly transferable, and have authenticated ownership. But you might be thinking…so what?

For creators, these new attributes are incredibly powerful. Instead of distributing their artwork, music, or other creations on platforms that are traditionally hard to monetize, they’re able to sell unique and authenticated items on a blockchain-based marketplace. In addition to the initial sales, NFT creators may receive set creator earnings on secondary sales. For example, a developer could make an in-game skin that can be used across a variety of games and has established authenticity and ownership, and that developer may earn money other times that skin is bought or sold.

This technology is revolutionary for collectors, too. Imagine you’re about to buy a concert ticket online— with NFTs, you can trust its authenticity, because of the undisputed blockchain history, instead of relying on the reseller’s word

What are NFTs used for?

An NFT can represent anything, but let’s explore some of the ways NFTs are being used today, and potential implementations for the future.

Art NFTs

An art NFT is a type of NFT that represents a piece of digital art, such as a drawing, painting, or piece of digital artwork. Each art NFT is unique and traceable to the original creator of the NFT, and that connection to the creator may be valuable as well. Art NFTs are a new form of digital art that can be collected and sold, similar to physical artwork. Art NFTs can also have additional utility (for example, owning the NFT may also give you commercial rights to use the underlying artwork).

Artists are creating incredible and novel pieces with NFTs. Damien Hirst used NFTs in his collection “The Currency”, in which he created digital versions of 10,000 unique physical paintings. Collectors had one year to decide if they wanted the digital or the physical version of the painting— whichever version they did not choose would be destroyed.

Profile picture NFTs (PFPs)

A profile picture, or PFP, NFT is any NFT that's primary purpose is use as a social media profile picture, or avatar. These NFTs are digital items that are authenticated on a blockchain network, making them verifiably unique. Some PFP NFTs also grant access to designated online communities.

Profile picture NFTs come in various forms, ranging from static images to animated or interactive designs. They may be based on characters, take the form of animals, look like humans, or be abstract.

These are probably the projects you’ve heard the most about

Bored Ape Yacht Club (BAYC), Doodles, World of Women (WoW), and more. For many people on the internet, these PFPs actually become their online identity. Not only do they identify with the group, they strongly identify with their avatar. PFP projects are also centered around holder benefits (like BAYC’s famous yacht party) and community (like WoW, which donates a portion of their creator earnings to women-centric charities).

Photography NFTs

A photography NFT is a unique digital asset that represents a specific photograph or artwork. It is stored and recorded on a blockchain, a decentralized, immutable digital ledger technology.

Photography NFTs are stored and transferred digitally, allowing them to be easily shared and displayed online. The ownership and authenticity of a photography NFT is verified and recorded on the blockchain, allowing it to be easily transferred between users.

NFTs offer a way for photographers and artists to sell and distribute their work in a digital format, while also providing collectors with a unique and verifiable digital item.