What is NFT?
<image courtesy of Billboard.com>
NFT stands for Non-Fungible Tokens.
But to really understand what that means, we have to start at a higher level.
Fungible means exchangeable. In the financial context, a fungible asset is something that could be interchanged with another asset for the same value. The easiest example of fungible assets to understand is the currency we use everyday. Say you have a $10 US dollar bill. I can swap you another $10 US dollar bill and they would both work the same. And on the blockchain, one Bitcoin is fungible with another Bitcoin. The same applies to Ethereum and other crypto assets.
A non-fungible asset, on the other hand, means that it is unique and cannot be interchanged with another asset. Some of the examples in the real world would be the ownership of a real estate or a rare gem.
The next keyword in NFT is token. A token is a type of cryptocurrency that is an asset or has a specific use and resides on the blockchain (click here for an explanation of what blockchain is). Using a real world corollary, a token is like a unit in a particular currency.
Taken together, NFT means something that has been tokenized and recorded on a blockchain to create a digital certificate of ownership that can be bought and sold.
For NFT art, it means the OWNERSHIP of the artwork – be it a painting, a song, a video or something else – is uploaded to a blockchain where it could be tracked, transferred, bought and sold. Keep in mind though, the artwork itself is NOT uploaded to the blockchain. There is also nothing that could stop others from creating copies of the artwork. Imagine if you own the original Mona Lisa by Leonardo Da Vinci. You decided to show it at a museum. People are free to take pictures (or reproduce in this sense) of it – but you still own the original which cannot be duplicated.
There are additional advantages to the artist as well. A NFT can be programmed so that the original creator can get a percentage of all resale revenues. Say a primary purchaser decides to resell a NFT art for $1 million USD, the original creator could be entitled to as much as 10% ($100,000 USD) of the resale price. And the same would happen to any transactions after.