Metaverse Jargon

NFTs (Non-Fungible Token)

A unique digital code stored on a blockchain that cannot be replaced/divided. The token represents a record of ownership for digital/physical assets.

What are fungible goods/contracts? If I take one dollar from you and give back a different dollar, we would be even, as it’s fungible (replaceable). We could also divide the dollar into 50 cents each and exchange it with the same net result.

I cannot, however, replace your dog with mine, even if it’s the same breed, size, sex & age, as they are non-fungible and unique.

Now extend that to digital art – we want that art to be non-fungible, so it’s not replaced/divided and retains its value.

So, NFT’s allow for transactions to stay unique and secure. It is used mainly for digital assets but recently started getting traction for tracking physical assets. The asset creator needs to link the asset to a blockchain to make an NFT token, to sell on a marketplace supporting that token.

An important thing to note is that the actual asset is not present in the blockchain but a smart contract to the asset. So, NFT is like the deed to your house, proving ownership, while the asset you bought is separate, just like your house.