What is NFT (Non Fungible Tokens Meaning)

NFT literally means non fungible token. To find out  what it means, let's understand each concept.

What is a token

A cryptocurrency token is a digital representation of a unit of value. Almost anything can be tokenized. 

What are the different types of tokens

All things in the world are divided into unique and not unique. Here are some examples of unique things:

• A Van Gogh painting
• A birthday cake from your mom.
• Your fingerprint.

And here are examples of non-unique tokens:

• Money bills 
• Mass-produced cars
• Your iPhone 

Uniqueness applies not only to objects, but also to things immaterial. Fictional characters, musical works, and every human being is unique. Thus, all things in the world can be divided into these two categories:

• Fungible

• Non-fungible

Non-fungible entities are what NFT is all about. 

Each NFT has a distinct value and specific information that sets it apart from other tokens. Unlike cryptocurrencies like Bitcoin or Ethereum, NFTs cannot be exchanged on a like-for-like basis due to their unique properties. NFTs can represent various forms of digital or physical assets, including art, collectibles, real estate, and more, making them highly versatile in the digital world.

NFT vs. cryptocurrency: Key differences

While NFTs and cryptocurrencies both operate on blockchain technology, they serve different purposes. Cryptocurrencies, such as bitcoin, are fungible and can be exchanged one-to-one, while NFTs are unique and can't be exchanged for another token. This fundamental difference is rooted in the meaning of the term “non-fungible".

Cryptocurrencies serve as a medium of exchange or investment by facilitating transactions and acting as a store of value. In contrast, NFTs are more like digital collectibles, each with its own unique characteristics and value.

NFT and Blockchain Technology

NFTs are built on blockchain technology, which provides transparency, security, and immutability to transactions involving these unique tokens.

Blockchain is a secure and trustless decentralized ledger that records the transfer of ownership of NFTs. In the block explorer you can see the entire transaction history of the NFT starting with the minting.

Blockchain ensures the uniqueness and verifiability of each NFT, creating a secure basis for ownership of digital assets. The use of blockchain in NFTs also enables new business models and revenue streams, driving innovation in the digital economy.

Best NFT Use Cases

Ownership of NFT provides proof of authenticity and provenance, making it valuable to creators and collectors alike.  The ability to prove ownership and authenticity makes NFTs valuable in a wide variety of industries:

Art and Collectibles. Tokenizing their works in the form of NFTs allows creators to monetize their works by confirming ownership and authenticity. In addition, NFTs allow artists to receive royalties from secondary sales, which increases their income.

Gaming. In the gaming industry, NFTs are used to represent in-game assets such as characters, skins, and weapons. Players can buy, sell, or trade these assets on various trading platforms, creating a real economy in games. 

Music. NFTs offer musicians a new way to distribute their work directly to fans without middlemen. Artists can sell exclusive tracks, albums or concert tickets as NFTs, giving fans a unique ownership experience. This model not only increases fan engagement, but also allows artists to generate more revenue from sales.

Fashion. The fashion industry uses NFT to create digital representations of clothing and accessories that can be worn in virtual metaverse environments.

Real estate. NFTs can represent ownership of real estate or virtual land in a metaverse. They facilitate transparent transactions and can simplify the buying and selling process by eliminating the need for intermediaries.

Event ticketing. NFT tickets are increasingly being used at concerts, sporting events and conferences, providing a secure method of issuance and validation. This approach reduces fraud and allows attendees to easily resell tickets while retaining proof of authenticity.

Decentralized Finance (DeFi). NFTs can act as collateral for loans, allowing users to borrow funds without selling their assets, such as in Gondi. In addition, NFTs can represent positions in liquidity pools, as in Uniswap v3.

NFTs in trading and investment. NFTs are commonly used as a way to diversify portfolios. NFTs can also serve as a store of value and hedge traditional asset classes. Another way to hedge risk in investments is to create indices of cryptocurrencies, tokens, NFTs, or all at once. Investing in NFTs involves the acquisition of digital assets with the expectation of future returns or growth in value. NFTs can be viewed as financial assets that have intrinsic value based on their rarity, uniqueness, and market demand.

Charities and non-profit organizations can use NFTs to represent donations or specific causes, creating a tangible asset that donors can own. This approach not only raises funds, but also raises awareness of social issues through unique digital collectibles.

Supply chain management. NFTs can increase supply chain transparency by tracing the origin of goods from production to delivery. Each step in the supply chain can be captured as an NFT, ensuring authenticity and ethical sourcing practices.

NFT Examples and Transactions

Examples of NFTs include digital art pieces, music albums, metaverse's lands, and even tweets. NFT transactions are recorded on the blockchain, providing a secure and transparent ledger of ownership transfers. Each NFT transaction includes details like the token ID, buyer, seller, price, and timestamp, ensuring authenticity and provenance of the digital asset. 

For instance, the first tweet ever made by Twitter CEO Jack Dorsey was sold as an NFT, highlighting the diverse range of assets that can be tokenized. 

Another example of NFT is the digital artwork "Everydays: The First 5000 Days" by Beeple, which sold for millions of dollars at auction. These examples illustrate the wide-ranging applications of NFTs and their potential to transform various industries.