Let me distill this down so you can walk away from this article fully understanding the main concept of NFT’s without being bogged down in the technicals.
The following is a really helpful way of thinking about NFT’s, and while it’s not 100% accurate, the conceptual understanding is the most important thing for our community to take away.
A ‘fungible’ token, is one that can be exchanged, and the value is the same. If I take ¥10,000, and give it to you, and you give me 2x ¥5,000 bills back. We’re have the same value of Yen that we started with, so we’re both happy. Does it matter we hold different bills? No, they are ‘Fungible Tokens’.
What if one was signed by the late great Elvis Presley and there was a record of this taking place? It would be fair to say that this holds a different intrinsic value. The genuine, and verifiable signature on this bill, means it’s now worth a fortune!
Imagine a set of bills, with signatures of different celebrities on them. Each one unique, each one with it’s own inherent value. These, in a way are ‘Non Fungible Tokens’, as they cannot be exchanged like-for-like, they are publicly verifiably unique, this concept is the basis for NFT’s. Non-Fungble-Tokens.
NFT’s are best thought of like entries in a big shared spreadsheet. They are tokens, long unique codes (like a barcode!) that can be attributed to different people. So on this spreadsheet, various barcodes can be associated with various people (people own digital wallets, just like they own email address’s. Our spreadsheet can show what addresses, own what tokens).
The tokens can be exchanged, and traded between people, but when something moves, it has to be updated on the big shared spreadsheet.
This is where the concept of the ‘blockchain’ comes in. The blockchain is not too dissimilar to this big shared spreadsheet, the main take-away is that everyone else has a copy of the spreadsheet, and everyone updates their community owned spreadsheet every time a new transaction takes place.
I could not just take your tokens from your address, and attribute them to my address fraudulently. Everyone in the world would turn around and clearly see that their spreadsheets don’t ‘match up’ to what I’ve claimed. This transaction could not be publicly verified.
So transactions on this big spreadsheet have to be verified publicly in order for them to be accepted. Making it extremely secure. No one can ‘fudge the numbers’ and get away with it.
So what does this mean?
It means for the first time in history, anything can have one of these uniques codes attached to it, or represented by it. A digital file for example, can be represented by one signal unique code, an NFT. So just like we can all publicly verifiably know that the Mona Lisa is in the Louvre museum in Paris, we can publicly verify that someone does or does not own a particular NFT.
With verifiable ‘uniqueness’ comes value, just like our Elvis-signed Yen bill.
Does this make sense? Any questions you have, others likely have too! Comment below and our community will answer.