We’re working on a series of articles that tackle the challenge of explaining some current topics in a way that non-experts can understand. Check out our previous article in the series, What the Heck is a Bitcoin Anyway? But, today we’re focused on another topic that people are hearing about in the media, but for the most part can’t properly explain. So, what the heck is an NFT anyway?
NFT = Non-Fungible Token
That takes care of it! Shortest article ever. LOL! Clearly, Non-Fungible Token isn’t a very helpful description either, so let’s see if we can clarify just a bit. Non-fungible basically means that something is unique and not easily replaced with something else (like the Mona Lisa). This would be the opposite of “fungible” which means something that can be easily replaced or replicated by something that is essentially the same thing (like a roll of toilet paper or a dollar bill).
The “token” part of NFT is related to the fact that NFTs are digital in nature. NFTs are digital and stored in the blockchain (a term covered initially in our BitCoin article). An NFT is a unique digital file. OK, this is helpful, let’s dig a bit deeper.
What Types of Things Can be NFTs?
Digital files. It could be a digital image, music, text, a tweet, etc. Basically, anything digital ‘could’ potentially be an NFT. But, a key piece of it is that non-fungible aspect. So, it isn’t just any old digital image file. The idea is that it is the ‘original’ file of that image.
Why are NFTs Valuable?
OK, so what? If I have a file of an image, why do I care if it is the ‘original’ NFT of that image or just a copy? Great question!
One way to think of it is that if you own the NFT of an original piece of digital art, you can then resell copies of it using blockchain technology and make money on each sale, as long as those sales occur on using blockchain technology. However, as we all know, images can easily be copied and proliferated online, with no involvement in blockchain technology. So, owning an NFT doesn’t mean you actually control how it gets copied and distributed.
There is an argument that owning an NFT is like owning an original Van Gogh. Other people may have posters or prints, but only you have the original. In the art world, that original painting has extreme value. But, does this translate over to digital art?
So far, the answer seems to be yes. There are NFTs that have sold for thousands of dollars or in rare instances millions. However, this is still very much an evolving market, so if decide to buy an NFT (or create one yourself!) on’t start making those retirement plans just yet.
