NFT stands for Non-Fungible Token. It is a vastly used term in the current digital realm. You may now be wondering what non-fungible means, well non-fungible means non-replaceable or non-exchangeable which denotes that this cannot be replaced by a similar thing as it has some kind of uniqueness.
NFTs date back to the year 2014, and a digital artist named Kevin McCoy minted the very first NFT which came to be known as ‘Quantum’.
What actually is NFT?
Non-fungible tokens (NFTs) are blockchain-based digital assets having distinct identifying characteristics and data that separate them from one another. They cannot be traded or converted for equivalents, unlike cryptocurrencies. NFTs are digital information units that are kept on a blockchain database. These can be used to indicate real-world items, such as art and property investment. Each non-fungible token serves as a form of originality proof; demonstrating that a virtual currency is one-of-a-kind and not replaceable.
How Do NFTs work?
NFTs have a special ID and code and work on blockchain technology. These blockchains are contract enabled (Smart Contracts) and consist of all the information relating to the owner's identity. The functioning of NFTs is established on two concepts when it is being utilized in any digital platform - scarcity and royalties.
Scarcity - Scarcity is an operation by which the owner decides how they are going to use their asset and how many they want to place in the token market. For instance - there are certain pens of different colours in the form of NFTs, the owner who made those pens will decide how many replicas of those pens they want to sell. These pens will have slight and almost unidentifiable differences but will have a particular uniqueness in them.
Royalties - NFT’s royalties are synonymous with what practices in the actual world. For instance, ‘A’ has created some NFTs and is the proprietor of that digital asset, whenever someone will buy that NFT, a certain amount from that particular purchase will be allocated to ‘A’, who is the original owner of that NFT. This is because NFTs are made from special software codes or say Smart contracts that can verify the proprietor and the shareability of that NFT.
Though NFTs exist at a very early stage, they have the potential to expand, develop and ultimately create a lot of opportunities for future artists, businesses and individuals.