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What is an NFT?
A non-fungible token (NFT) is a type of digital asset (token) generated through cryptographic hashing on the blockchain.
NFTs are different to the more widely known cryptocurrencies, in that their characteristics are unique, and they cannot be exchanged or replaced with identical tokens.
The uniqueness of NFTs is achieved by smart contracts within the NFT, which store the unique and exclusive data associated to each NFT.
The non-fungible element of NFTs mean that they cannot be broken down into smaller denominations, as is the case with traditional and fungible cryptocurrencies, therefore an NFT cannot be sent in portions (however, there is the possibility of fractionalised ownership of NFTs).
NFTs can be thought of as means of proving digital ownership of assets, and can be applied to things such as art, media (music and videos), in-game items, collectibles, fashion, tickets, licences and certificates, ticketing, and domains.
NFTs do this by showing authentication and provenance of certain pieces of data and recording this on the blockchain. Such data includes:
- The creator of the NFT;
- When the NFT was created;
- A string of who has purchased the NFT, and when;
- The price the NFT was purchased for; and
- The current owner of the NFT.
As this data is recorded on the blockchain, it is searchable by anyone, with the blockchain acting as a ‘source of truth’ for authenticity.
Whilst, on the face of it, NFTs may appear just to be digital images, there is potential for much wider application of what an NFT can be and do. In a technological sense, NFTs are fairly new, but additional use-cases and utilities are being discovered and applied all the time.
So, watch this space…