Non-Fungible Tokens (NFTs) are crypto tokens that use blockchain technology to prove the authenticity and ownership of a unique digital asset.
An asset is fungible when it’s interchangeable with another identical asset. Money, for instance, is a fungible asset since you wouldn’t care which dollar you use to shop, and my dollar is equivalent to your dollar.
The rise of NFTs might have initially started with collectors and fans trying to capture a piece of digital art history, however, what’s happening today bears a great resemblance to the Tulip mania
Similarly, most digital products (song, ebook, picture) have always been fungible as they can be easily copied multiple times, and users don’t typically care which copy they use. As a result, we need intermediaries (platforms, contracts) to claim ownership over a digital asset and transfer it to another person. NFTs solve this issue by embedding a unique ID (metadata) into a token that represents the asset. When an NFT is minted, its ID is registered on the blockchain and becomes its passport, enabling users to see and verify its entire history (ownership, creator, price) without the need for an intermediary.
The blockchain is a digital ledger that allows the recording of transactions and enforcement of contracts through a decentralized network of computers and without the need for an intermediary. Here’s a schematic of how it works (applied to a Bitcoin transaction)…READ ON
