A non-fungible token is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable. NFTs can be used to represent items such as photos, videos, audio and other types of digital files
These are essentially cryptographic assets on blockchain with unique identification codes and metadata. These codes and metadata make them individual and unique.
One characteristic of an NFT, therefore, is that it cannot be copied or duplicated
An example of an NFT from the real world would be a piece of art, such as the Mona Lisa. While Leonardo Da Vinci is known for numerous pieces of art, there is only one Mona Lisa.
While you can trade one BITCOIN for another, you can’t trade one Mona Lisa for another Mona Lisa.
In the art world, a lot of money is spent to authenticate pieces of work before being sold. An NFT does not need middlemen to ensure authenticity.
What is fungible vs. non-fungible?
ungible or fungibility means simply interchangeable. “This is a characteristic of most financial instruments and market assets.”
By contrast, non-fungible property/assets/funds are not easy to exchange or mix with other similar goods or assets.
In other words, stocks, Certificates of Deposits, Cryptos, etc. are fungible assets.
An example of a non-fungible asset would be land or even diamonds. While land is a simple one to classify, each individual diamond is also unique. Each diamond has a different cut, size, grade, and so forth and therefore can’t be interchangeable with another diamond.
How Are NFTs Created?
Market places that currently allow users to freely create NFTs include OpenSea, Raible, or Mintable.
Creating art NFTs is particularly popular and these market places cater for just that.
How does NFTs work?
It is the proof-of-ownership that is ultimately the tradeable and non-fungible asset.
Once created, the blockchain ledger records the NFTs and their unique identifying codes. The blockchain ledger then also records each sale and resale and ownership.
This not only prevents the copying of an NFT but also removes fraudulent claims of ownership or even claims over creation
Why do NFTs have value?
This is simply a case of supply and demand. The key here is the supply side that drives up the value of NFTs. Since there is only one individual asset, high demand can lead to significant increases in value.
Taking the Mona Lisa as an example, experts estimate the value of the Mona Lisa at more than $800m. Had Leonardo da Vinci painted numerous Mona Lisa paintings to exactly the same quality, these would be fungible. Their value would also be significantly less than the single painting thought to be edging towards $1 billion.
Market appetite will continue to dictate value. A unique NFT of interest versus one of little interest to collectors and investors will vary significantly in price.
For example, Twitter CEO Jack Dorsey recently tweeted a link to a tokenized version of his first-ever written tweet.
Bids have reportedly reached in excess of $2.5 million. Other Jack Dorsey tweets are unlikely to have a collectible value, however, even though each tweet is unique.
How do I buy or trade NFTs?
For those looking to buy or trade NFTs, identifying the right marketplace is the first step.
There are numerous market places at present that cater to different areas of the collectible world.
What are the most expensive NFTs?
This is a list of the highest known prices paid for non-fungible tokens (NFTs) representing digital assets. The current record price is approximately US$69.3 million paid for Beeple’s digital artwork entitled Everydays: the First 5000 Days in March 2021.