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What is NFT? Non-Fungible Token Definition, Types, and Why

What is NFT? The definition of NFT, the Non-Fungible Token

Before we explain what NFTs are, let us clarify the definition of ‘fungible’. Fungible means something that is able to replace or be replaced by another identical item. If you and I were to interchange 5 USD, it is fungible because 5 USD cash holds the same value. An identical cryptocurrency can also be fungible. As 1 Bitcoin holds the same value regardless of who is possessing it, therefore it is mutually interchangeable. So you can refer that ‘non-fungible’ means it is not interchangeable and not replaceable. It is because each asset is unique, and therefore holds different values.

Non-fungible Token (NFT) is a digital asset that is unique and is used as collectibles rather than as a payment or investment instrument. Also, as an NFT is stored on and verified by a blockchain, primarily on Etheruem, the information of the ownership, the source, and scarcity are public and everyone who accesses can check the record.

Types of NFTs

NFT is a digital asset so anything that is digital can be referred to as NFTs.

The major formats of NFTs are:

  • Image
  • Video
  • GIF
  • Audio
  • 3D Models
  • Text

Why people are collecting and buying NFTs

The main reason why people are buying NFTs is due to the full ownership. Especially in this era where everything can be shared and viewed online in the digital format, there is a rising need to fully claim ownership. And now with the Non-Fungible Token (NFT), the way to claim the full ownership of the digital contents is possible. Creators can retain ownership rights over their own work with NFT.

The usage of NFTs

The usage of NFTs is expanding. It also sees more usage not only on the art pieces but also in the exchange of online game items. When used in a specific industry, people do expect a rise in value. We will handle in-depth the NFTs’ usage in various industries in our next post. So stay tuned.