NFTs or Non Fungible Tokens are cryptographic assets on a digital ledger called the blockchain. NFTs contain unique identification codes and metadata that distinguish them from each other. However, like Cryptocurrencies, you cannot trade or exchange them equivalently. This makes them different from fungible tokens like Cryptocurrencies, which are identical to each other. Hence, Bitcoins and altcoins are used for medium sizes.
Fungibility in Non Fungible Tokens
Fungibility is the ability that helps to exchange an asset with a similar asset without losing its value. It defines an asset’s characteristics, like divisibility and value. For example, one Bitcoin is always equal to another Bitcoin, just like one dollar is equivalent to another dollar. For example, if you lend your friend a $20 note, he/ she does not need to repay that money with the same $20 note – any $20 note will do. Non Fungible Tokens things are not interchangeable and have unique properties. This makes them drastically different, even though they may look similar to each other.
Characteristics of Non Fungible Tokens
Non Fungible Tokens are immensely powerful tokens that allow flexible methods to represent non fungible assets on a blockchain.
Unique: NFT tokens contain code information that describes each Token’s property that makes it unique from other tokens. It is a piece of digital art that might have coded information about pixels. For example, tokenized in-game items store details like which player owns which item and its other attributes.
Traceable: All the Non Fungible Tokens (NFT) have a record of transactions in the blockchain from its creation, including every time it changed hands. That means each Token is verifiably authentic. This is particularly important for owners and potential buyers of tokens.
Rare: To make non fungible tokens attractive to buyers, they should be limited. This makes the assets more desirable for a longer period, and also, the supply should not exceed demand.
Indivisible: NFTs can’t be transacted as fractions of a whole. Just like once cannot purchase half of a concert ticket or trading card. Moreover, you cannot split non fungible tokens into smaller denominations.
Programmability: Like all traditional digital assets and tokens built on smart contract blockchains, NFTs are also programmable.
There are several examples of Non Fungible Tokens in the real world, such as drama event tickets, paintings, etc. For example, two paintings may look similar, but they may have different levels of rarity. Similarly, front-row tickets of the theatre are much more valuable than tickets for the back row.
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