What are NFTs? Non-fungible tokens, or NFTs, are an exciting new development in the world of cryptocurrencies that could have a massive impact on the future of the digital economy. The very definition of an NFT can be confusing, though, especially when you first start learning about them as they’re different from other types of tokens and cryptocurrencies that are already in widespread use today. That’s why we’ve put together this brief guide to explain what NFTs are and how they work!
What Are Non-Fungible Tokens (NFTs)?
In 2018, we saw a huge surge in new crypto assets based on non-fungible tokens (NFTs). But what are they exactly? And why is everyone talking about them? Here’s all you need to know about non-fungible tokens. Non-Fungible Tokens: A Primer: When we talk about cryptocurrencies like Bitcoin and Ethereum, it’s easy to get caught up in their similarities. After all, both are protocols for sending money from one person to another—and that’s where most of our attention goes when trying to understand them.
However, there’s another interesting way of thinking about these networks: not as ways of moving money from point A to point B but as places where points A and B can be created and transferred independently of each other. Think about a virtual land registry: If I were creating one today, I could create 100 unique parcels and then sell ownership of those parcels over time—these would be fungible tokens.
A Brief History of NFTs
Non-fungible tokens were initially conceptualized in 1993 by Kevin Werbach and Rosi Campello. But it wasn’t until 2009 that they were first implemented on any blockchain platform when Counterparty used them to represent assets. Since then, they have been adopted by other companies such as Wax, Swapper and FoldingCoin. In 2013, CryptoKitties became the most famous application of non-fungible tokens (AKA unique ones) since CryptoCelebrities before that.
How They Work
A Non-Fungible Token (NFT) is a unique digital token or item in a software game. Unlike cryptocurrencies such as Ethereum or Bitcoin, they’re tied to real-world value. When you own an NFT, it has an objective measure of value in real money. In other words, its value can’t decrease as it does for cryptocurrency—and more importantly, it can’t be tampered with by a centralized organization like a bank or government. This means that if you own something like CryptoKitties, your cats aren’t going anywhere. And neither is their value.
How Blockchain Works
A blockchain is simply a distributed database that maintains a continuously growing list of records called blocks. The key innovation of a blockchain is that it doesn’t have a central administrator—which means there’s no one who can corrupt, modify, or reverse transactions. Every node in a network has access to all information contained in any block, which allows anyone to verify that a transaction happened at any point in history. This adds an extra layer of security and makes them virtually unhackable.
How They Are Used in Games
Non-fungible tokens, or NFTs, represent digital assets that are unique in some way—whether it’s a physical property like a person’s name, a company logo, or a rare commodity. Different from most cryptocurrencies on their own (cryptocurrencies like bitcoin and ether serve as stand-ins for other currencies), these tokens have specific uses within games, platforms, and applications.
The most popular use case for NFTs is to create collectibles that players can trade with one another. In blockchain-based games such as CryptoKitties, players can buy, sell and breed digital cats using Ethereum’s ERC721 token standard. Because each token is unique, it can be sold at different prices depending on its rarity or popularity among collectors.