Non-fungible token (NFT) definition
A non-fungible token, or NFT, verifies the authenticity of a digital asset. It is non-fungible which means it cannot be traded or replaced with something else.
What is a non-fungible token?
A non-fungible token (NFT) is a unit of data. It is stored on a blockchain and means its owner can certify it as a digital asset to be unique. This means it’s unique and not interchangeable. An NFT is unique and can’t be replaced with something else.
Non-fungible token meaning
The definition of non-fungible token - an NFT is a one-of-a-kind asset, which means they can be used to represent items including works of art, photos, videos, audio, and other types of digital files.
How do NFTs work?
Non-fungible tokens explained: a non-fungible token works like an autograph, or stamp of ownership. It's a cryptographic token and each digital file has a signature which tracks the NFT’s ownership using blockchain.
Non fungible token meaning - non-fungible means non transferable. An NFT can give proof of ownership - because they allow anyone to view them - but at the same time allow the item’s creator to maintain copyright, if they wish.
Why are NFTs so popular?
In 2021 there was a surge in the number of NFTs. NFTs are part of the Ethereum blockchain; however, other blockchains, notably Flow, and Tezos also have their own versions of NFTs.
What are NFTs used for?
A buying frenzy in early 2021 has seen NFTs used for an increasing number of assets. In March 2021 Jack Dorsey, founder of Twitter, sold an NFT of his first tweet for over $2.5m.
Digital art was one of the first uses of NFTs. A digital artwork entitled "Everydays – The First 5000 Days", by artist Mike Winkelmann, known as Beeple, sold for US$69.3m in 2021.
NFTs have been used for collectibles - in February 2021, a LeBron James slam dunk NFT card sold for $208,000.
NFTs have been used within games, such as buying digital plots of land or other items. These can be traded on third-party marketplaces without permission from the game developer.
NFTs are also being used by the music industry. The US band Kings of Leon released an album in early 2021 using an NFT - it generated over $2m in sales, with 25% going to charitable causes
The disadvantages of NFTs
NFTs are not considered environmentally friendly because they are associated with blockchain transactions which consume a large amount of electricity.
There have been moves to use alternatives which require less energy as well including the use of off-chain transactions which require less energy.
Some NFT art sites are giving clients the option of buying carbon offsets when making NFT purchases.
Another concern is that the data links which point to the NFT can die, these links can degrade over time.
As mentioned earlier, owning an NFT does not give the buyer copyright. This means the original owner could create duplicate NFTs of the same work.