You might find the term “non-fungible token” or NFTs in the crypto world. You might wonder why would you need such a thing and what is so special about them. This blog will look at all the answers and why NFTs are important even though they might not seem so to you.
NFT Stands For NON-FUNGIBLE TOKEN
But that doesn’t help, does it?
Let’s take one step at a time.
What is a token?
A token is a thing that represents anything well-defined.
- Currency of an ecosystem.
- Flag of a country.
- Lease of your car/home.
- Amazon credits.
In the blockchain world, it usually defines a cryptocurrency.
Which, like any other currency, is fungible.
Fungible, eh, what?
100Rs Note in my pocket is exactly the same as the 100rs Note in your pocket.
Your 100Rs Note could be newer or older than mine,
but when we’ll go in the market to buy something,
they’ll both be treated equally.
Fungible = interchangeable.
Unless they are not.
What if the 100Rs Note in your pocket bears the autograph of the MS Dhoni?
Are they interchangeable now?
What you have in your pocket is one of a kind.
What is the value of the 100Rs Note in your pocket?
The one with the MS Dhoni Autograph?
Ten Thousand Rupees?
The value of that 100Rs Note totally depends on who is valuing it.
- If a homeless person gets it, they might exchange it for a nice meal.
- If an MS Dhoni Fan gets it, they might keep it forever and pass it onto the next generation.
- If the MS Dhoni Himself gets it, they might value it as just another 100rs Note (because they can make more).
So, in short, your 100Rs Note is NOT something that can be objectively valued or exchanged with another dollar bill.
It’s a non-fungible token.
Now, back to the crypto world…
Before NFTs, the tokens that came were all fungible.
One bitcoin in my wallet is valued exactly the same as one bitcoin in your wallet.
But in 2014, something called “monetized graphics” came around, and it was…
In 2014, it was minted on the Namecoin blockchain.
It is called “Quantum.”
And it is the first-ever NFT.
But wait, what do I mean by “minted”?
Let me explain.
In simple terms, blockchain is a record-keeping mechanism.
It can keep any sort of record,
Each record has some data and the owner to whom that data belongs.
Having that data on the blockchain is not important.
Having your name next to it is important.
Think of your favorite popular artist.
Mine is Shakira.
There’s one original account.
And a million fake accounts in her name.
What’s the difference?
The blue tick.
That blue tick separates the original from the copies.
What’s the use of an NFT?
It depends on who has the NFT.
Like your autographed 100Rs Note
– If a homeless person gets it, they might exchange it for a nice meal.
-If a Fan gets it, they might keep it forever and pass it onto the next generation.
Beauty lies in the eyes of the beholder.
The value lies in the eyes of the holder.
The simplest way to value art is to calculate how much you can brag about it.
If you owned a painting that I made, you’d not show it to anybody.
If you owned Mona Lisa, you wouldn’t stop talking about it.
That’s what NFTs are and why they are valuable.