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Cryptocurrency FAQ - What is a non-fungible token (NFT)?

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Written by   75
1 year ago

Before we start, it's important to understand what fungibility is.

Discussion about fungibility

Photo by Omid Armin on Unsplash

An asset that is fungible means that it can be interchanged with another asset of the same value. Fungible assets also have value when they are divided into parts. An example would be a brand new $1 US dollar bill or 1 Euro note. Those bank notes can be replaced with other equal valued, authentic brand new $1 US dollar bills or 1 Euro notes. The dollar and Euro can also be divided into cents, which also hold value.

Similarly, a newly mined Bitcoin Cash coin (1 BCH) is equivalent to another one stored in an individual's cold storage wallet. They are fungible assets that can be replaced with each other, have the same value, and their parts also hold value.

On the other hand, assets that are non-fungible are unique, and not equivalent to any others in the world. Because of this, they can have unique valuations. A real-world example of a non-fungible asset could be a concert ticket in a venue with no standing room. The ticket grants the owner access to a specific seat location, and the ticket has no value if it is divided into parts.

Applying the principle of non-fungibility to tokens

I discussed how blockchain tokens can have many use cases in a previous article. By applying what we have learned before with the explanation above, a non-fungible token (NFT) is a token that represents a unique asset. These can either be entirely digital assets or tokenized versions of real-world assets.

It’s worth noting that NFTs can’t be replicated or transferred without the owner’s permission – even by the issuer of the NFT, - Binance Academy

Melanie Kramer provides a bit more information in her article.

Non-fungible tokens contain identifying information recorded in their smart contracts. It’s this information that makes each different and as such, they cannot be directly replaced by another token, - Melanie Kramer

Use cases for NFTs include:

  • Tickets for travel, or events such as concerts, conferences, etc.

    • Seat reservation

    • Degree and/or timing of access provided

    • Entitlement to specific services (refundable, transferrable, etc.)

  • Digital identity

  • Digital items (for gaming, gambling, and other industries)

  • Crypto-collectibles

I was reflecting when writing this article, and I now believe that NFTs can be identified as a fourth type of token. My previous article will be updated to reflect this.

Please note that some of these NFTs listed above are not available for mainstream use at the moment! I'm simply predicting their prevalence and acceptance will increase dramatically over the next five years.

It's also worth remembering that some tokens meet the requirements to fall under more than one classification.

Related reading: Cryptocurrency FAQ - What are the different types of tokens?

Examples of crypto-collectibles

I feel that NFTs minted as crypto-collectibles will be an exciting part of the crypto ecosystem that will flourish within the next five years. There will be some that need to be purchased, but some of them can be acquired free (usually be completing tasks or by winning them in a contest). The following are a few examples of NFT collectibles.

CryptoKitties

Figure 2: CryptoKitties screen cap by CryptoKitties

This was a game built on the Ethereum blockchain that allows players to collect, breed, and exchange virtual cats known as CryptoKitties.

Each CryptoKitty can have a combination of several different properties, such as age, breed, or color. As such, each of them is unique, and they can’t be interchanged with each other. Also, they are indivisible, meaning that there’s no way to divide a CryptoKitty token to divisible parts, - Binance Academy

This game became infamous because the entire Ethereum network slowed to a crawl at the height of its popularity.


LAND

Graphic 3: LAND screen cap by Sandbox Games

A LAND is a digital piece of real estate in The Sandbox metaverse, a persistent 3D voxel universe created by players and secured through blockchain technology to give players a virtual playground.

You can buy a LAND to populate it with ASSETS and GAMES, - Sandbox Games

NBA Moments

Graphic 4: NBA Top Shot screen cap

I have written an article about NBA Top Shot NFT collectibles previously, and I have a small collection of these NFTs already.

Is it simply human nature that compels many of us to collect things? Which collectible NFTs would be of interest to you? The Dr. Who franchise? Care Bears franchise?

Thanks for reading, and stay safe!

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Cover image by loufre (modified by the author) from Pixabay 

Graphic 1: Photo by Omid Armin on Unsplash

Graphic 2: CryptoKitties screen cap by CryptoKitties

Graphic 3: LAND screen cap by Sandbox Games

Graphic 4: NBA Top Shot screen cap by NBA Top Shot


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Resources:

https://academy.binance.com/en/articles/a-guide-to-crypto-collectibles-and-non-fungible-tokens-nfts

https://medium.com/sandbox-game/the-sandbox-tokens-lands-730b36217070

https://decrypt.co/resources/non-fungible-tokens-nfts-explained-guide-learn-blockchain

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Comments

Crypto Kitties are probably the most famous NFT collectibles. Really cool and addictive 🐈.

$ 0.00
1 year ago

are there any NFTs that interest you right now?

thanks for visiting?

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1 year ago

Was checking on some magic game collectibles that I've found on telegram, but it got bored pretty quick.

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1 year ago

i'm planning a nice post on something i'm keeping an eye on...not sure if i'll have time but it may be of interest to you

$ 0.00
1 year ago

Wow! thanks for this new vocabulary!

And thanks to @Macronald 's, I bet that was from the Patronage Nomination that he initiated :)

$ 0.00
1 year ago

i definitely appreciate the new exposure from @Macronald!

thanks for visiting and i'm glad you enjoyed the article.

$ 0.00
1 year ago

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$ 0.00
1 year ago

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reader engagement must be a part of the tipping algorithm...need it to be updated a bit though since your posts need more love from rusty.

and sadly that $200,000+ tip was not awarded to me. =(

$ 0.00
1 year ago

Don't be too greedy! 😜 And oh yes lol but I'm not worrying. I'm happy of what I'm getting anyway. But, I'm really glad to see those deserving getting tips no matter how much it is, still makes you smile and proud! And @pvmihalache got his rusty friend back in action too! Cheers! Keep it up!

$ 0.00
1 year ago

Topic of the day: Rusty had his batteries changed and now is working fine 🔋

$ 0.00
1 year ago

lol...hopefully they are energizer batteries...those keep on going, and going, and going...🐰

$ 0.00
1 year ago

Yes... time will tell

$ 0.00
1 year ago

oh wow...just saw your sponsorship! very generous of you...thank you!

again, i feel bad that i can't reciprocate due to triggering tax law in my region. 😥

$ 0.00
1 year ago

All is well. Why feel bad when I'm feeling good about it. You want me to feel guilty making you feel bad? Just say cheers

$ 0.00
1 year ago

Cheers my friend! 🥛

$ 0.00
1 year ago

very helpful these technical articles like yours on NFT's how they have value like cryptokitties and their market. Are useful to those whom may not totally get dapps and NFT's and how they may or may not have value, and while copies may exist nothing is identical as far as their smart contracts are concerned. Good work keep at it .

$ 0.00
1 year ago

thanks for visiting and for your kind words! it took me a long time to understand all these concepts...more articles to come! =)

thanks for the tip too...sadly i can't reciprocate due to triggering tax laws in my region.

$ 0.00
1 year ago

Very helpful post my dear. Back my post also.

$ 0.00
1 year ago

Thank you for visiting and for your kind words!

$ 0.00
1 year ago

💟

$ 0.00
1 year ago

Wow! It's a great article ❤️

$ 0.00
1 year ago

thank you so much for your kind words and for visiting! =)

$ 0.00
1 year ago

You are welcome

$ 0.00
1 year ago

Have you got that cryptokitties before? Lol That kitties must cost a fortune to collect or no?

$ 0.00
1 year ago

no, i didn't get into CryptoKitties...i was still learning about this space when that game blew up and honestly i didn't see the appeal of that game back then. since that time i have invested a little bit into crypto, and learned a lot more.

not sure if you knew this, but the team that developed CryptoKitties (Dapper Labs) is the same dev team working on NBA Top Shot...which i think is a good sign for success.

thx for visiting and for your tip!

$ 0.00
1 year ago

Hope you like the Tractor I sent :D

$ 0.00
1 year ago

need to read your article first...Lol

will let you know...hopefully this weekend when i can breathe a bit...thx!

$ 0.00
1 year ago

Kitties are indivisible?

  • Challenge accepted. 😜

Just kidding. No cats were harmed for the writing of this comment. 😇

$ 0.00
1 year ago

Lol...kitties just multiply!

$ 0.00
1 year ago

That's right. 😁👍

$ 0.00
1 year ago