What is an NFT? With the recent news of Sir Tim Berners-Lee auctioning the source code of the early web as an NFT, I wanted to explain what exactly is going on.
What Is An NFT?
NFT stands for Non-Fungible Token, and to understand this new technology we have to break the acronym down into its component parts: N, F, and T. When we talk about fungible and non-fungible we’re talking about the value of an item.
F: Fungible means that the value of something is equally interchangeable with something else. A good example of this is money. The value of a U.S. dollar is constant; one dollar will always equal one dollar. I can give you a US$10 bill and you could give me 10 US$1 bills, and the value of all of them are equal.
NF: Non-fungible means that the value isn’t equally interchangeable. If I sell a rare coin for US$100 you could give me US$100 and now the coin is yours. But later down the road, maybe new information about the coin was discovered and now its perceived rarity has increased. You could then try to sell it for US$500, and if someone else agrees to buy it, now it’s worth US$500. Since the value changed this coin is non-fungible.
T: The T part stands for token. In this instance, a token is a digital thing stored on a blockchain, typically the Ethereum blockchain for NFTs. This “thing” is just pure computer code, but it’s a unique piece of code that includes a “signature”. This unique digital code makes it non-fungible.
NFT: Now we arrive at the final product. Like that rare coin I mentioned, think of an NFT as a unique, collectible asset. The most popular form of NFT is artwork. Example: The creator of the iconic video “Charlie bit my finger” was sold as an NFT for over US$760,000.
The original video was deleted from YouTube but you can, of course, still download it elsewhere. But collectors would know these videos aren’t “authentic.” The NFT is more like a certificate of authenticity. Like a physical painting, only one person can own an NFT at a time, and they can be sold or traded at any time.
How to Buy an NFT
There are plenty of NFT marketplaces to buy and sell your digital collectibles. Here are a few:
- OpenSea: The world’s first and largest digital marketplace for crypto collectibles and non-fungible tokens (NFTs). Buy, sell, and discover exclusive digital assets.
- NFT Showroom: NFT Showroom is a digital art marketplace built on Hive, a fast and free blockchain that makes creating and collecting rare digital art simple and accessible.
- Rarible: The first community-owned NFT marketplace. Create, sell or collect digital items secured with blockchain.
Just remember the non-fungible part. The perceived value of “Charlie bit my finger” may change. If you want to trade it for an NFT of Nyan Cat, you can do that as long as the buyer thinks the value is equal or near equal. Or, maybe in 20 years no one cares about the video anymore and the value becomes zero. But, I suppose you can say that for most things.