What are NFTs?
TLDR: An NFT is a one-of-a-kind digital asset that isn’t replaceable or interchangeable. While NFTs often take the form of images, they can be music, podcasts, memes – almost anything – and can even represent real-world items.
Disclaimer: Not an NFT expert – just a girl, standing in front of a concept, asking it to MAKE SENSE.
If you’ve read my other blog (it’s here if you want to, no biggie) then you’ll know that I recently decided to dip my toe into the big old lake that is NFTs. As it turns out, dipping your toe isn’t currently an option, and instead you sort of have to belly-flop into the deep and hope for the best. So that’s what I did and, in the hopes of saving some people the supremely sore belly, I thought I’d share some of what I saw under there.
What does NFT stand for?
Obviously any old sausage can Google this for themselves, but as we’re here, I might as well start from the beginning.
NFT stands for non-fungible token.
Clear as muck, right? What regular person has ever heard the word ‘fungible’? If I were to take a guess at what it meant, I’d have thought it was a descriptor of things that are similar to and/or relate to mushrooms. “Hmm, this tagliatelle is quite fungible, isn’t it darling?”
Shockingly, that isn’t what it means. Fungible is, in fact, an economic adjective used to describe goods or commodities that are mutually interchangeable. That is, they can be exchanged for something of equal value.
Items that are fungible are usually uniform, if not identical, which is what makes them replaceable and therefore interchangeable. Here’s some examples of fungible things:
cash
gold
oil
thousands of kilograms of oats
(not that most of us have thousands of kilos of oats lying about… or a bunch of oil and gold, for that matter, but you get the idea).
What is non-fungible?
Now we know what fungible means, this bit should be fairly straightforward.
If something fungible is uniform, replaceable and interchangeable, then something non-fungible is the opposite: unique, irreplaceable and non-interchangeable. Here’s some examples:
diamonds
land
trading cards
Why are these items not fungible? Because each one will have entirely unique properties that can’t be replicated, so they’re not interchangeable with anything else.
Fungible is not the same as tangible
It’s important to note that fungibility and tangibility are not the same thing, and they are not mutually exclusive. A thing can be both non-fungible and tangible and vice versa.
Here’s some examples:
A house is tangible but non-fungible. It’s tangible because it exists in the physical world, but it’s not fungible because no house is directly replaceable with another. Even if you live on a street of identical houses, they are still not interchangeable because they inevitably have differences like their gardens being in slightly different places, or being slightly closer to the main road.
The most relevant example of something that is not tangible but is fungible is a cryptocurrency, like Bitcoin. You can’t touch a Bitcoin and it doesn’t physically exist, but it is fungible, because one Bitcoin can be exchanged for another. It’s replaceable and interchangeable.
So… what’s the token part?
The dictionary definition of a ‘token’ is “a thing serving as a visible or tangible representation”. While this is applicable to the definition in the crypto world, it isn’t entirely accurate.
There are two definitions of a ‘token’ in crypto – the first is as a way to describe any cryptoasset. Great, simple enough.
Wait, what’s a cryptoasset? The proper definition is here, but for the purposes of this, just think of it as a digital asset in the crypto world.
The second is to describe cryptoassets that run on top of another cryptocurrency’s blockchain. I stole that definition from Coinbase because… well, they just said it better. An example of this would be ApeCoin (which, confusingly, is not a coin, but a token) because this is a cryptoasset that runs on the Ethereum blockchain, rather than running on its own like Bitcoin or Ethereum.
If you’re thinking ‘what on Earth is a blockchain’? Then I feel ya – I’m going to write about that at some point, too.
All together now!
So, a non-fungible token is: a cryptoasset that runs on an existing blockchain and cannot be replaced or exchanged because it is unique.
Even more simply put: an NFT is a one-of-a-kind digital asset. Boom, go tell your grandma.
Now, the NFTs that are most popular right now are the kinds that take the form of images – your Bored Apes, your World of Womens, your Azukis and so on. But by no means do NFTs have to be images. In fact, anything can be an NFT if it lives on a blockchain and is totally unique, even real-world items like artwork can be represented as NFTs (“why would you want that?” Makes the buying and selling process more efficient and reduces chances of fraud blah blah blah). For example, the inherently unique and not at all interchangeable Mona Lisa could be represented as an NFT if whoever owns it now (The Louvre?!) decided they wanted to sell it through the medium of crypto.
I don’t think my grandma’s interested
That’s fine, tell someone else. Or don’t. Why not browse some NFTs on the largest NFT marketplace, Opensea?
What’s Opensea? Blummin’ ‘eck, always with the questions!