What is an NFT?

Jack Dorsey, the founder of Twitter, sold the first Tweet he ever wrote to a Malaysian businessman for a whopping $2.9 million. Elsewhere, the original GIF of the Nyan Cat sold for nearly $600,000. And someone just bought a video clip of one of LeBron James’ slam dunks for $200,000.

It seems that people are paying large sums of money to own these digital items. This leads us to the question: why? And the answer lies in what is known as NFTs.‍

NFTs Explained

NFT stands for non-fungible token. To understand the concept better, you need to know the difference between fungible and non-fungible.

When an item is said to be fungible, it means it can easily be duplicated and replaced with an exact copy. For example, when you purchase a shoe online, the manufacturer will send you one of the many identical pairs they have made. And it doesn’t matter to you which one of those shoes you get.

On the other hand, a non-fungible item is a one-of-a-kind (it cannot be duplicated or replaced). Jack Dorsey’s first Tweet is the perfect example. The only way to see the original Tweet is to go to his account. It doesn’t and cannot exist anywhere else.

As you can imagine, non-fungible items are usually more valuable than fungible ones. This is because, as humans, we tend to place a higher value on unique things. So what about the token part of NFT? That has to do with the blockchain, the underlying technology behind cryptocurrencies.

When the Malaysian businessman, Sina Estavi, made an offer to Dorsey, and he accepted it, the Tweet was minted on the blockchain. The result is a crypto token in the form of a unique certificate, stating that Mr. Estavi now owns the Tweet. No one else can own or duplicate this token, making it non-fungible.

So, basically, an NFT is a one-of-a-kind crypto token that shows ownership of a unique digital item.‍

NFTs and Ethereum

The Ethereum blockchain is the technology that powers NFTs, even though its digital currency, ETH, is fungible. NFTs store more information to make them more unique than an Ethereum coin. With how NFTs have taken off, other blockchains are in the process of implementing their own.‍

Buying and Selling NFTS

Any type of digital content, such as music, videos and pictures, can be an NFT. There are many marketplaces out there offering you the chance to buy NFTs. To buy one, you need a digital wallet, where you’ll store the token and the required cryptocurrency to buy it.

You can also turn the digital assets into NFTs on these marketplaces. These platforms usually have detailed and clear instructions on uploading your content and turning it into an NFT. If someone finds your NFT valuable, they’ll buy it with a cryptocurrency, and it will most likely be with Ethereum.