In this article, we’ll give you a quick overview of what NFTs actually are. Completely without technical stuff, structured and with examples. If you’ve never dealt with NFTs before, this article will give you an excellent start.
NFT stands for “non fungible token”. The easiest way to understand an NFT is to look at the 3 words in reverse order.
What is a token?
A token is a digital unit, what this unit does, how you can use it and what functions it has can differ from token to to token.
All that really matters is that it is a separate, identifiable entity.
In everyday life, things like a stock, a car, a euro banknote, a piece of money, a house, or a piece of art would be examples of something you can equate to a token in the crypto world.
Of course, there are differences between a share, a euro banknote and a house, but all three are units in their own right, each of which has a different function.
A token is something like that in the crypto world, something identifiable and unique. Different tokens can be used for very different purposes.
What does fungible mean?
Fungible means interchangeable. A fungible token is a token that you can exchange 1 to 1 for another token of the same type and it makes no difference to you.
One example is a euro banknote. If you get a €100 bill and give a €100 in return, it is an exchange for you that makes no difference.
Bitcoin is a good example of a fungible token in the crypto space. When you exchange one Bitcoin for another, nothing has changed for you in principle.
What does non fungible mean?
Non fungible means not interchangeable. If you have a house, trading for a house two blocks away would probably make a significant difference to you. If you have an original Picasso, trading it for an original Rembrandt is a change.
If you have a rare 300SL Gullwing, a Fiat Multipla would not be the same. Rare are both, but for very different reasons.
Cars, houses, works of art are good examples of non-interchangeable entities. Also Non Fungible Tokens (NFTs).