Investing: NFTs (Non-Fungible Tokens), explained

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December 8th, 2021

39 mins 54 secs

Season 7

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About this Episode

NFTs (Non-Fungible Token), explained

A non-fungible token (NFT) is a unique and non-interchangeable unit of data stored on a digital ledger (blockchain). NFTs can be associated with easily-reproducible items such as photos, videos, 3D models, audio, and other types of digital files as unique items (analogous to a certificate of authenticity). NFTs use blockchain technology to provide a public proof of ownership. Copies of the original file are not restricted to the owner of the NFT, and can be copied and shared like any file. The lack of interchangeability (fungibility) distinguishes NFTs from blockchain cryptocurrencies, such as Bitcoin.

NFTs have drawn criticism with respect to the energy cost and carbon footprint associated with validating blockchain transactions as well as its frequent use in art scams. Further criticisms challenge the usefulness of establishing proof of ownership in an unregulated market based on digital files that are easy to copy.

Resource: Wikipedia

Key Takeaways

  • The difference between fungible tokens and non-fungible tokens is fungible tokens are cryptocurrencies like Bitcoin while non-fungible tokens are unit of data that represent a unique digital asset stored and verified on the blockchain.
  • NFT represents a lot of things (which is usually a picture). It is also a pointer within the URL to that picture which is usually stored in an interplanetary file system.
  • NFTs are not divisible but can be fractionalized.
  • There are four major types of NFTs which are: cryptopunks, bored ape yacht club crypto (BAYC), game NFTs, and collectible NFTs.
  • Currently, art is the second biggest pillar of NFTs with two types of art which is an original art and generative art.
  • Original art type of NFTs are designed in a software like an image or GIF and sells it as an NFT.
  • Generative art type of NFTs are designed through an algorithm that will create the art on the moment it is minted.

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