In simple terms, a non-fungible token aka NFT is an exclusive digital asset. Unlike Bitcoin which is a fungible asset, no non-fungible token is the same. Let us put it across like this, when we send 1 BTC to a user and receive 1 BTC, nothing changes for us. That is because each BTC is the same and this makes BTC a fungible digital asset.
On the contrary, an NFT is like Mona Lisa by Leonardo da Vinci. It is unique, it is scarce and that is what makes it valuable. One would never wish to trade Mona Lisa for Salvator Mundi as he will lose some value. On a similar basis, each NFT stores some form of Metadata that makes it a unique entry on the blockchain. For the matter of fact, even the NFT’s on similar blockchains are also not interchangeable.
How does non-fungible token empower the owner?
A Non-fungible token comes with a mechanism of storing rich metadata that is beyond the token symbol, supply, name, and balance. It stores the asset and ownership details too. As these details are stored on the blockchain, the owners and future buyers are assured about the provenance.
Non-fungible tokens or NFT’s made a name for themselves in 2017 with the release of CryptoKitties.
Do non-fungible tokens propose any value?
To understand the value it brings to the digital asset ecosystem, we need to peek into the evolution of NFTs. The attempts to create NFTs on blockchain started as early as 2013 with Color Coin built on bitcoin. But in 2017 first technical standard was defined for NFTs known as ERC721 on Ethereum blockchain. The standard is different from ERC20. That is because ERC721 tracks ownership and movements of individual tokens. And that is what makes a non-fungible token unique and valuable.
CryptoKittes, a cat breeding game was the first successful implementation of ERC721. For Cryptokitties players, each ERC721 represented a unique digital kitten that could not be replicated. And the most expensive CryptoKitty was traded in 2017 for $172,625(600 ETH).
This is when…