NFTs What, Why, and How by Pamela Tatam
NFTs What, Why, and How
February 1, 2022
by Pamela Tatam
So you’ve been hearing more and more about this mysterious NFT topic, and you’re ready to find out what it’s all really about. You’re in the right place! We’re going to go over the basics of NFTs and demystify some common areas of confusion and misconception. Ready?
Let’s start with the name. NFT stands for non-fungible token. Don’t worry; it’s not as complicated as it sounds. ‘Fungible’ means that something can be traded, like physical currency or cryptocurrencies. So, a non-fungible token means that this particular token can’t be traded for another one. Why? Because NFTs are digital representations of assets, and those assets can be nearly anything. An NFT isn’t a currency; it’s basically a certification of authenticity for a digital asset. Frequently, these assets are collectibles, like sports memorabilia, but they’re digital.
You might be asking why anyone would bother paying for something like this, and it’s a good question. Digital art is one of the best examples to explain this. If we think about physical art and how much people value it (think of a painting from a renowned artist like Monet selling at a world-class auction house for tens or hundreds of millions of dollars), the actual value lies in having the original. Anyone can go online and look at a digital representation of a Monet painting, but only one person in the world will be the owner of that piece. Scarcity creates demand, and NFTs allow for scarcity to be created around digital items.
Next, let’s talk about how NFTs are created and why they’re secure. If you’re familiar at all with how cryptocurrency works, then you’re well on your way to understanding how NFTs are created. NFTs use the same blockchain algorithm that cryptocurrencies like Ethereum use. This allows the NFT creator to build in unique information to each NFT, making everyone unique and distinguishable from all other NFTs. This also means that you can easily transfer ownership, and NFTs can be added together to create an entirely new NFT with its own identifiers.