What is an NFT (Non Fungible Token), and how does this relate to Cryptocollectibles
Posted On January 19, 2020
So What is an NFT?
NFT stands for ‘Non-Fungible Token’.
To understand this, first we need to define fungibility.
“In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable, and each of its parts is indistinguishable from another part. This is referred to as ‘Fungible’.”
Basically something that is ‘fungible’ can be exchanged for something else of the same kind. $100 note for another $100 note or $100 worth of coins. 1 BTC for another BTC or fractions of, etc. Fungible tokens have the same value of each other.
Non-Fungible items are unique and cannot be interchanged on a simple ‘same value basis’. Some real world items that are Non Fungible are, Stamps, Classic Cars, Comic Books, Collectible Cards, etc.
These all have unique characteristics like quality, shine, year of production, sometimes they’re signed by someone famous, etc.
‘Fungible Token’ VS ‘Non-Fungible Token’
We just learned what ‘fungibility’ means. Adding the word ‘token’ next to it usually refers to how they are distributed, held and traded amongst each other on the Blockchain.
We all know that Ethereum is the #1 platform for crypto projects to build on top of. ChainLink, BAT, OmiseGO, MANA, are just some examples. The coins or ‘tokens’ used for these projects are referred to as the ‘ERC-20’ tokens, an Ethereum token standard.
NFT’s, or at least the ones mostly mentioned on this blog are mostly issued on Ethereum. These tokens are currently an ‘ERC-721’ token standard.
In the crypto world, Fungible Tokens usually refer to Cryptocurrencies such as Bitcoin, Ethereum, XRP, etc where they are interchangeable. People don’t ‘collect’ these based on the time stamp or quality of each unit.
You can own these tokens on an exchange or hold them in your own wallet. For example, on etherscan we can see that I own 46,068 MANA tokens which are currently worth $.0316 each, in my own wallet.
Whereas a ‘Non Fungible Token’ is usually in reference to Digital Items on the blockchain that have different properties. Currently the market for NFT’s is fairly new so they cannot be ‘held’ on an exchange. You need to have your own digital wallet to hold your tokens. Check out this tutorial to set up your wallet.
You can see how in my wallet, I’m holding some ‘NFT’s, which are ERC-721 Tokens on the Ethereum Blockchain. Some Decentraland land, Gods Unchained Cards, Ethereum Domain Names, etc.
NFT’s, ERC-721’s, Cryptocollectibles, or whatever they will be referred to in the future, are basically what this whole blog is about.
Often the words ‘NFT’s’ and ‘Cryptocollectibles’ are interchangeably used as they mean more or less the same.
Some examples of NFT’s
Below are some popular Non Fungible Token project examples. Each item below is represented by an ‘NFT’ Token stored in a digital wallet.
Digital Cats you can breed and trade.
Digital Pets you can battle, trade, take on quests. The Axie Universe is vast.
Each Axie has it’s own set of stats, characteristics, parts and move-sets!
Gods Unchained – Trading Card Game
Cards you can collect with different rarity’s, (Color of gem on the sides), different shines, (color of card), etc.
Digital Land on the blockchain. Each pixel is 16x16m and can be eventually built on and traversed in VR! Each land has a different co-ordinate on the Decentraland map.
Although a lot of the above may seem similar to what you’ve seen before in other games. The big difference is, with blockchain technology we can TRADE these items amongst each other with 100% ownership, (by holding the token in your wallet), of this item. No one can take this token away from you without your permission, (unless you get hacked).
I can sell someone a Digital Land for 20,000 MANA, ($640USD), by simply listing it on the Decentraland Marketplace. The buyer can click ‘buy’ and execute a transaction where blockchain technology will do an instantaneous switch of the goods agreed to trade, in this case 20,000 MANA for a Digital Land. I will get the MANA tokens and the buyer will get the LAND Token.
This has opened up a HUGE new world of online Digital Item trading where you can buy and sell digital items with insane value with just clicks of a few buttons.
We will go through the A to Z of NFT Trading in future posts.