NFT is an abbreviation for non-fungible tokens. Because something is fungible, it cannot be traded for another item. For example, one work of art is not the same as another because they both have unique features. Fungible objects, on the other hand, can be traded for one another. For example, one dollar or Bitcoin is always equal to another.
Okay, but what exactly is NFT, and why is it useful for monitoring if they are tokens that exist on a blockchain and reflect ownership of unique items? Who owns what?
The problem with digital files is that they can be copied and distributed easily. When everyone has an identical copy of the file, how can you determine who the original owner is? The NFT solves this problem.
Take for example a piece of digital art that you created on your computer, essentially a JPEG. From this, you can create or mint an NFT that represents your art. Information about it is also included.
An example of this would be a fingerprint, a token name, and a symbol. This token is then stored onto a blockchain and you the artist become the owner. Now, you can sell that token by creating a transaction on the blockchain.
The blockchain makes sure that this information can never be tampered with. Also allows you to track who is the current owner of a token and for how much it has been sold in the past. It's important to note that the artwork itself is not stored within the NFT or the blockchain. Only its attributes such as fingerprints or the hash of the file, a token, name, and symbol, and optionally. Then a link to a file hosted on IPFs. You can learn more about IPFs here.
This is when NFT becomes strange. When you purchase an NFT that symbolizes artwork, you do not receive a tangible copy of the artwork. Most of the time, anyone can get a free copy. The NFT solely reflects ownership, which is documented in a blockchain. As a result, no one can meddle with it. The creator of the NFT retains the copyright and reproduction rights, so while the NFT owner owns the original artwork, and some argue that the NFT owner owns digital bragging rights.
So, while an artist can sell his original artwork as an NFT, he can also sell prints in addition to digital art. And if they can be used to sell concert tickets, domain names, rare in-game things, and real estate. And basically, anything that is one-of-a-kind and requires evidence of ownership. For example, Twitter's creator sold his first tweet as an NFT. Anyone can view that tweet on Profile, but only one person can own it, and that person is willing to pay more than 2.9 million dollars for it.
This article for example may even be used to create an NFT. You might then purchase it and become the owner of this film, despite the fact that it is available for free to everyone.
Now, why are some NFT worth millions? Well, their worth is determined by what people are willing to pay for it. If I'm willing to pay $200 for a particular NFT. Then it's worth $200. Price is driven by demand. So be careful and expensive and NFT might become worthless. If nobody is willing to buy it.
Okay, one more thing before we end, how do they work? Technically and if these are essentially smart contracts that live on a blockchain, in this case, the contract stores the unique properties of the item and keeps track of current and previous owners and NFT can even be programmed to give royalties to the Creator. Every time it exchanges hands.