WTF is an NFT?
A non fungible token, or NFT, is a unique token that is verified on the blockchain via a smart contract. The NFT represents data – like an image or video, or even a concert ticket. To understand what an NFT is it’s best to first talk about what the word fungible means. From there we can then determine the meaning of non-fungible and begin to understand the vast use case of NFTs.
So what is does fungible mean? Let’s pretend I give you a $100 bill. Now what would happen if someone came along and offered you to exchange that $100 bill with another $100 bill? Would you care? Well, aside from the shock of someone ripping a $100 bill from your hand you probably aren’t going to mind as long as it’s replaced with another bill or bills for that matter of equal value? A $100 bill is a $100 bill – you don’t care if it’s brand new, or 20 years old. In fact, you may not even mind if you received five $20 bills in exchange for that $100. To say that currency is interchangeable we are also saying that it is fungible.
NFTs flip the whole notion of the starving artist upside down!
Being that we are talking about blockchain and the use of tokens we can then decipher that an NFT is a token that represents a unique and non-fungible asset. As we mentioned above, NFTs are verifiable by the blockchain so therefore they are basically smart contracts that you interact with. An NFT that is an original piece of work for example has unique characteristics built into the smart contract that acts like a sort of DNA that is embedded into the art. This DNA outlines the artist, verifies it’s authenticity, lists all the other past owners, possible traits of the digital art, and any other meta data. It can also include any other directive that is built into the contract and be programmed to execute upon a resale. An example of this would be a 10% fee that gets returned to the original artist every time the art is resold. Yup, you read and understood that correctly, it does this all programagically via code built into the piece of art. Pretty cool right? Imagine an artist receiving a commission on work they sold 10 years ago.
So the next time someone asks you ‘WTF is an NFT?‘ You can simply say that an NFT is a token that represents something unique and is verified on the blockchain via a smart contract.