Non-fungible tokens, or NFTs, are unique digital assets that can be owned and verified by code written into a blockchain, or digital ledger. NFTs have emerged as a way for digital creators to establish original copies of their work, and allow for these items to be bought and sold online.

The easiest way to think of an NFT is as a certificate of authenticity. Any digital creation can be reproduced and shared millions of times on the internet, but an NFT validates an item as unique and original.

NFTs can be pretty much anything, from digital artwork to digital sports cards. They’re commonly used in gaming as collectible in-game items, and have even been represented in common online content like tweets or GIFs.

What’s the Difference Between Fungible and Non-Fungible?

To understand the difference between NFTs and fungible tokens, like Bitcoin, think of it this way — A Bitcoin is like a dollar bill. Each one is unique, but the value of every single one is the same. Bitcoins are interchangeable, and there’s nothing to distinguish one from another.

On the other hand, while the same NFT can be duplicated countless times, each one has its own unique code that separates it from another. In the same way that you could buy a print of a famous painting, you can still own and enjoy a reproduction of the art, but it won’t carry the same value as the original work.

Pros and Cons

With traditional collectibles, one of the main factors that establishes value is condition. The older an item, the less likely it is to be in decent shape. Since NFTs exist in an entirely digital space, this isn’t a concern. It’s also much easier to verify the authenticity of an NFT, since what makes it unique is embedded in its code, and can be traced back to the original creator.

The downside of NFTs are mostly associated with how new they are. Like any emerging technology, there are bound to be kinks to work out. Some platforms don’t support certain NFTs, and NFT markets are still relatively unregulated.

The other thing to consider is the relative value of any NFT. Like anything with some buzz around it, markets tend to be volatile, so purchasing a high-value NFT won’t necessarily net you a big return down the road.

Bottom Line

In 2021, NFTs are gaining more and more exposure, which aids the likelihood that the market for them will continue to grow. There’s speculation that such fast expansion could create a bubble, which is always something to keep an eye on.

That said, there’s potential for NFTs to become established as the new standard for collectibles in an increasingly digital world.

Overall, one thing’s for sure — NFT madness has only just begun.


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