What is NFT: A Brief Guide For Beginners
A non-fungible token (NFT) is a token that certifies that a digital asset is unique. It cannot be exchanged for any service such as a token of a cryptocurrency, but only applies to an individually specified equivalent value, for example, to a digital work of art.
A non-fungible token can therefore also be thought of as a type of digital proof of ownership.
A non-fungible token cannot be used as a means of payment like other tokens, but only serves as proof of ownership of a particular asset. Thus, each non-fungible token indirectly has an individual value that depends on the asset linked to it.
Definitions: Fungible and Non-Fungible
A fungible asset can be exchanged for other assets of the same type, quantity and quality. The value of a unit always remains the same.
A gram of gold can be exchanged for another gram of gold and a 5 euro banknote for another 5 euro banknote. Many different goods can be fungible if they have a purely material value.
One can exchange a sack of potatoes for another sack of potatoes of the same type, quality and quantity without making a profit or losing money.
Non-fungible means the value is not interchangeable with other values of that type. It is unique in the same way as an object of historical or artistic importance.
Even if you exchange a historical porcelain figure for another figure from the same limited series, you are still dealing with two completely different objects. Every object is unique.
It can be traded in exchange for a fungible value (eg money), but cannot be replaced by a comparable or equivalent object in case of loss.
Non-Fungible Tokens as Digital Proof of Ownership
As mentioned before, a non-fungible token represents ownership of something. While the vehicle registration document proves ownership of a car, an NFT does the same for the asset connected to it.
It is important to note that NFTs need not necessarily be limited to digital assets or assets. With an NFT token, you can prove you own this object. No one else can claim your ownership. NFTs can therefore be offered for a wide variety of non-fungible products.
You can use NFT to trade digital artwork. On March 11, 2021, an NFT for Mike Winkelmann's work 'Everydays: the First 5000 Days' sold for about $69,3 million.
It's a digital artwork that theoretically can be copied as many times as you like. But with the NFT, only one person has gained the right to call himself the owner.
NFTs for digital collectibles are always offered online. For example, there are digital baseball card auctions.
Other digital goods were also sold with NFTs. For example, Jack Dorsey, the founder of Twitter, made his first tweet available for sale. Videos, music and digital video game assets can also change hands via NFT.
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