NFTs, or non-fungible tokens, are digital assets that stand to redefine how we engage with digital content in the digital age. No two NFTs are the same and they each have a unique digital signature that proves provenance and individual ownership of an asset. A fungible asset, on the other hand, is not unique: it can easily be traded or exchanged for an identical item of the same value – this could be currency, shares in a company, or goods.
NFTs exist on blockchains, digital databases that underpin cryptocurrencies such as Bitcoin and Ethereum. They are created from digital objects that represent both tangible and intangible objects such as art, videos, GIFs, collectables and music. Rather than owning a physical asset, the buyer owns a digital asset instead.
A blockchain is a distributed public ledger that is a record of who owns what. The technology underpins digital currencies and NFTs. Blockchains allow digital information to be distributed but not altered, copied or deleted from a network made up of thousands of computers. However, some blockchain networks use tremendous amounts of energy to run their networks.
Cryptocurrencies are digital forms of money not issued by a central bank or government. Each cryptocurrency has unique properties for its own bespoke use cases including privacy, speed, and more. Like any form of money, cryptocurrencies are fungible: a Bitcoin is always equal to another Bitcoin, in just the same way that a dollar is always equal to a dollar.
NFTs give the owner specific exclusive rights to a piece of data, often including but not limited to exclusive ownership rights. Be it digital or physical, anything considered desirable or collectable can become an NFT that is bought or sold, even though NFTs frequently comprise artwork, footage or audio that is already easily available for free on the internet.