What is A Non-Fungible Token?
“Fungibility” is the exchangeability of a particular item/asset. For instance, a simple dollar bill is a perfect example – a $10 dollar bill in my pocket worth exactly the same as the $10 dollar bill in your pocket (unless it is, of course, a fake). We could exchange these bills and both of us would neither win nor lose – because the value of these assets is the same and they are interchangeable.
However, if we exchanged plane tickets (for example), we would have completely different experiences, based on the unique information present on those tickets. Thus, they are non-fungible. The kind of item is the same, but the value is different because of the information unique to that item. We can’t simply exchange plane tickets – as one would take you to the neighbouring city, and the other might be for the plane going halfway around the world.
This uniqueness, or non-fungibility, is what makes NFTs so great. If we are to apply this concept to the cryptocurrency space, Bitcoin is a great example of a fungible token. BTC has a total supply for 21 million identical coins – any user could exchange one Bitcoin for another and the value would be the same.
Non-fungible tokens are not interchangeable – each of these tokens is unique. What makes them unique is the data or the information stored within the NFTs. The identifying data inside NFTs is stored in their smart contracts.
Another very important feature of NFTs: They are indivisible – you can’t send 1/2 of a non-fungible token to someone, like you can with BTC.
One of the examples of current projects like that is SuperRare – a blockchain project that is creating non-fungible tokens that enable digital artists to link an image or a GIF they’ve created to a token. This NFT represents ownership of the item and allows the creator to retain their copyrights.
Another application of non-fungible tokens appears to be in the space of virtual assets. As an example, the sale of unique domain names is now gaining popularity with the help of NFTs. The Ethereum Name Service is selling its “.ETH” domains as non-fungible tokens. At the present moment, it costs 0.014 ETH, which translates to about $5 a year to register your domain – a much better price than the traditional route. Unstoppable Domains is doing the same, with its “.crypto domains”. Of course, if your site is called “joesmith.crypto” one would probably assume that a Joe Smith is somehow related to the world of crypto.
CryptoKitties is a video-game that allows users to breed and collect unique crypto cats. Each cat created on CryptoKitties platform is 100% unique and impossible to replicate. Creators are able to buy and sell cats within the community, create cryptocats’ collections, and earn rewards. Although this may seem like a ridiculous idea, some of the assets on that platform were sold for hundreds of thousands of USD.
Crypto-collectibles are gaining a lot of traction in the online world – these days, anyone can purchase tokenized versions of their favorite sports stars or Hollywood actors. In addition to that, users are using NFTs to digitize traditional collectibles, such as coins, stamps, or baseball cards.
Just like with any novice technology, the application and overall adoption of NFTs is not clear at the moment, but it is quite obvious that these tokens are causing up some stir in the crypto community. In addition, since non-fungible tokens provide the unique opportunity to digitize assets, possible applications of this technology cannot be limited.
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