NFT standards

Non-fungible tokens (NFTs)

Here’s a brief rundown on what NFTs are, why some people choose to invest in them, and what risks they may pose to investors and the environment.

What Is an NFT?

In understanding what a non-fungible token is, it’s important to first understand the meaning of non-fungible. Since fungible describes something that can be evenly exchanged for a similar something, non-fungible describes something unique, which cannot be swapped. When Users buy a cup of coffee, Users can choose to pay with any of the dollar bills in their pockets, because dollar bills are fungible. If Users own an original painting, however, it is one of a kind, or non-fungible. In fact, digital art is the focus of a lot of current NFT trading, although NFTs can be made for anything digital — a gif, jpeg, tweet, or YouTube video, for example. The NFT itself is a unit of data that provides proof of ownership. Users could think of it as a certificate of authenticity that verifies a particular person owns certain rights to that unique digital asset. This certificate is stored on a blockchain, a publicly accessible digital ledger of transactions that allows anyone to see who owns a particular NFT.

Why People Invest in NFTs

It’s important to note that buying an NFT is not the same as buying the actual asset it’s tied to. Typically, the creator of the digital asset represented by the NFT retains the creative rights to the piece, including the copyright. Non-fungible tokens (NFTs) are digital assets that represent objects such as art, collectibles, and in-game items. NFTs are stored on a digital ledger known as a blockchain that certifies the integrity of each asset and ensures that they're unique. As a result, the NFT market has experienced exponential growth, having increased by 2100% to US$2 billion in the first quarter of 2021. As of the third quarter of 2021 NFTs market is estimated to be worth an excess of US$10.5 billion. Investment in non-fungible tokens (NFTs) has grown so aggressively since 2020 — from $13.7 million in sales in the first half of 2020 to $2.5 billion in the first half of 2021.