What Is An NFT - Non-fungible Tokens Explained, And Why You Should Not Dismiss This Fad

What is an NFT? Non-fungible tokens explained, and why you shouldn’t dismiss this fad

NFT, or non-fungible token, has become 2021's 'blockchain,' a term you've never heard of before that has suddenly become ubiquitous. NFTs are ubiquitous, whether it's Twitter CEO Jack Dorsey auctioning his first tweet or Kings of Leon selling their latest album. However, what is an NFT?

While some regard it as the latest fad, a new crypto-esque bubble that will inevitably burst, others believe that NFTs could play a significant role in the future of digital art.

We can't say for certain which one it will be for the time being, but continue reading to learn everything you need to know about NFTs and our take on why they're worth monitoring.

What is an NFT?

As previously stated, the term 'NFT' stands for non-fungible token, but what does that actually mean?

If something is fungible, it is not one-of-a-kind; it is a commodity. Dollar bills are fungible, which means that two bills of the same denomination are virtually identical. Apples are fungible, as is your box of cornflakes and your PS5.

However, if your PS5 has been transformed into artwork through the use of drawing or embellishment – as you may have seen online – it has become something non-fungible.

Consider the Mona Lisa. You could photograph it and hang it on your wall, but it would not be the same as – or have the same value as – the Louvre's Mona Lisa. As with other unique works of art, the Mona Lisa is non-fungible in the sense that it is one-of-a-kind.

A non-fungible token is a representation of this in the digital realm. Someone may possess a duplicate of the same digital artwork, but it is not the original.

It's an odd concept to grasp. When data is stored digitally, the original file and a copy of it appear to be identical. However, for some, that original file has a 'specialness' that makes it unique.

While it may appear as though those individuals are imposing an arbitrary value on it, this is not dissimilar to the Mona Lisa example in many ways. Fundamentally, the Mona Lisa painting and a copy of it are the same image; it is only that the original has been endowed with qualities that confer value on it.

That is the case with NFTs. While you may not be convinced yet, there may be more tangible benefits to NFT ownership in the future.

What is the future of NFTs?

This is where things become complicated. According to some, NFTs are just the latest fad, which, like the 'GameStonks' bubble, will eventually burst, leaving behind a slew of winners and losers. However, there are some intriguing ideas that may ensure the survival of NFTs.

One possible scenario is for content creators to reward their most loyal fans based on their NFT ownership. Alternatively, creators could host a stream or Q&A session in which only owners of specific NFTs – or a specified number of the creator's NFTs – are permitted to participate.

You may then see individuals selling their collection of NFTs if they decide to part ways with a particular artist. Consider it a digital equivalent of selling old albums: the seller receives a return on their investment, and a new fan can catch up on everything that has come before.

With reselling, NFT creators can also stipulate that they receive a cut if an NFT is resold. It is common for art to increase in value over time, and this would allow artists to benefit from that increase.

None of this guarantees that NFTs will not become a fad, but they do open up a range of intriguing possibilities, making them well worth monitoring.