NFT stands for Non-Fungible Token, a unique digital item stored on a blockchain. Pretty much anything can be an NFT and they serve as a digital record of ownership of that item.
What's the difference between Fungible and Non-Fungible?
Fungible items are the same. For example, my Bitcoin is the same as John's Bitcoin in every single way. We could swap Bitcoins and still have the same item, one Bitcoin each. Bitcoins don't have any unique identifiers
Non-Fungible items are unique and have several unique identifiers. Every time a Non-Fungible item is created it's allocated a unique token ID when it gets written to the blockchain. These IDs serve as digital records. For example, John might own a digital item that has a unique token ID of 2233. I might own the same digital item but the unique token ID of 2234 is different and this item was previously owned by a celebrity making it more valuable than John's digital item. Even though these items are the same to look at, if myself and John swapped these digital items then he would end up with the more valuable item because it was previously owned by a celebrity.
How do NFTs work?
Whenever an action is carried out with an NFT it gets recorded on the blockchain and this is what enables authentication. The record for that NFT serves as a permanent statement of authenticity that can be viewed by anyone. In the real world if you buy a piece of art it comes with a bit of paper called a certificate of authenticity. This can easily be lost, destroyed, or counterfeited and shows how fragile the current system is in the real world.
In the blockchain world, the system is solid because from the first moment that the item gets written to the blockchain a series of data is then built on top of that record forever and visible to everyone. If you go to buy an NFT from someone then you can see its history all the way back to the day it was first created.
Why is NFT technology so revolutionary?
Blockchain technology is revolutionary for digital items. With NFTs, you can authenticate ownership, prove scarcity, and openly transfer an item to anyone in the world and these new attributes are incredibly powerful for creators. Traditionally monetizing an item is pretty difficult but blockchain technology makes it so much easier for creators to do. The authenticity side of this technology is so huge. Take a concert ticket for example, buying that ticket as an NFT means you can prove it's authentic whereas in the real world, there's a lot more risk that the ticket you're buying might be fake.
What are NFTs used for?
NFTs can be used for a whole host of things. They might be used in areas such as - Gaming, Art, Music, The Metaverse, Photography, Memberships, Domain Names, Cards & Collectibles, Legal Documents, Identity, and Personal Records. NFT uses can be pretty much anything. This is only the very beginning when it comes to the world of NFTs.