Definition
A non-fungible token (NFT) is a unique and non-interchangeable unit of data stored on the blockchain. NFTs can be associated with easily-reproducible items such as photos, videos, audio, and other types of digital files as unique items. They are analogous to a certificate of authenticity. NFTs use blockchain technology to provide a public proof of ownership.
A New Asset Class
Before someone can buy a good, it has to be clear who has the right to sell it, and once someone does buy, you need to be able to transfer ownership from the seller to the buyer. NFTs solve this problem by giving parties something they can agree represents ownership. In doing so, they make it possible to build markets around new types of transactions — buying and selling products that could never be sold before, or enabling transactions to happen in innovative ways that are more efficient and valuable.
One Of A Kind Items
As the name “non-fungible token” suggests, each NFT is a unique, one-of-a-kind digital item. They’re stored on public-facing digital ledgers called blockchains, which means it’s possible to prove who owns a given NFT at any moment in time and trace the history of prior ownership. Moreover, it’s easy to transfer NFTs from one person to another — just as a bank might move money across accounts — and it’s very hard to counterfeit them. Because NFT ownership is easy to certify and transfer, we can use them to create markets in a variety of different goods.
Programmable
Because blockchains are programmable, it’s possible to endow NFTs with features that enable them to expand their purpose over time, or even to provide direct utility to their holders. In other words, NFTs can do things — or let their owners do things — in both digital spaces and the physical world.
Memberships
In this sense, NFTs can function like membership cards or tickets, providing access to events, exclusive merchandise, and special discounts — as well as serving as digital keys to online spaces where holders can engage with each other. Moreover, because the blockchain is public, it’s even possible to send additional products directly to anyone who owns a given token. All of this gives NFT holders value over and above simple ownership — and provides creators with a vector to build a highly engaged community around their brand
Thus owning an NFT effectively makes you an investor, a member of a club, a brand shareholder, and a participant in a loyalty program all at once. At the same time, NFTs’ programmability supports new business and profit models — for example, NFTs have enabled a new type of royalty contract, whereby each time a work is resold, a share of the transaction goes back to the original creator.