What is an NFT?
Non-Fungible Tokens or “NFTs” have taken the art world and the cryptocurrency world by storm in the last year. What is an NFT and how does it fit into an investor’s portfolio, if at all? We examine these fascinating questions and more as we take a deeper look at non-fungible tokens and the world of verifiable digital assets.
To truly understand what an NFT is, we must understand what the term non-fungible means. To understand what non-fungible means, we must first look at the definition of fungible. Fungible means:
“being something (such as money or a commodity) of such a nature that one part or quantity may be replaced by another equal part or quantity in paying a debt or settling an account.”
NFTs are Not Fungible
Fungibility and fungible items are very easy for us to understand, as we work with fungible items every day. The most ubiquitous fungible item and easiest example to understand is money. As an example, the value of any dollar bill is equal to the value of any other dollar bill. There are no dollar bills that are worth more than other dollar bills. The dollar bill is fungible. The dollar bill can be replaced or substituted by another dollar bill. In fact, any dollar bill in the entire world can be substituted or exchanged for another dollar bill and this is because dollar bills and other currencies are fungible.
1 Bitcoin = 1 Bitcoin
Similar to dollar bills and other types of currencies, cryptocurrencies are also fungible. 1 Bitcoin = 1 Bitcoin; .5 Ethereum is equal to .5 Ethereum. Conversely, non-fungible tokens cannot be replaced, exchanged, or substituted for one another, as each non-fungible token is a unique, one-of-a-kind token. Each NFT remains unique, and this is what makes NFTs non-fungible.
Non-fungible tokens are digital assets that can do what no other digital asset can do. There are five elements of an NFT that really separate it – as an asset class – from any other type of investment product. Below are the five main elements or characteristics of non-fungible tokens:
- Proof of Ownership of the digital asset;
- A unique, one-of-kind ID that encapsulates all of an asset’s characteristics;
- The rights and privileges that flow from that ownership;
- Encrypted asset; and,
- Registered on the blockchain.
Hello Digital Assets
These five separate characteristics combine together to produce a digital asset. A digital asset like an NFT can be transferred and sold due to the reliability and security of blockchain technology.
Proof of ownership of a digital asset is something that did not exist in our world economy 20 years ago. While someone could technically own a website, own music, own anything digital – the owner would always be in the same predicament: What does it mean to own a digital asset, and how does someone prove they own a digital asset?
Previously, before the invention of non-fungible tokens, these were impossible questions to answer. Now, with NFTs, there is an efficient, secure and reliable way to hold, transfer and sell digital assets. Non-fungible tokens have created an opportunity to buy and sell digital assets wherein proof of ownership is easy to assert and to confirm. It is groundbreaking and allows for the instantaneous sale and purchase of high-end assets.
NFTs are Unique, One-of-A-Kind Digital Assets
The unique ID that encapsulates all of an asset’s characteristics is another attribute of non-fungible tokens. The word “encapsulates” is an important one and a word that we should dig into a bit deeper. The word encapsulates means: to express the essential features of (something) succinctly.
NFTs are Encrypted Digital Assets
Also, because of the blockchain technology, the NFT owner can easily show proof-of-ownership. The title of the digital asset exists in the blockchain, and from this ownership, the NFT Monkey owner, or any NFT owner for that matter, will obtain and continue to obtain the rights and privileges that flow from the ownership of that particular NFT or digital asset. This could mean staking rights; access to exclusive media channels, etc.
They are immutable and their ownership is verifiable. Blockchain is a technology that is reliable, efficient and 100% secure.
NFTs and the utility they Provide
The underlying technology in NFTs allows developers to create enormous utility and benefit for the NFT owner. The underlying blockchain technology and smart contract technology enables the creator to enable the non-fungible token to do wondrous things for the NFT owner. The NFT can pay interest to the owner, or allow access to exclusive social media channels, or provide access to VIP and backstage events.
This information can be on specific non-fungible token projects, or information about obtaining whitelists on other NFT projects. Another great benefit to owning an NFT Monkey is the fact that the NFT itself may appreciate significantly in value. Thereby providing the NFT owner with the benefit of using all of the utility and functionality while holding onto the digital art as it increases in value.
In the coming years, we can expect that almost every industry, including law and healthcare, will be using NFTs in new and exciting ways.
Thank you for reading this article, we hope it was helpful. Please check back for more news on NFTs, resources, and updates on our Project, Awk Monks! Also, check out our Ultimate NFT Monkey Guide for more in-depth information on all things NFT Monkey Art at: The Ultimate NFT Monkey Guide.