NFTs ("Non-Fungible-Tokens") are one-of-a-kind tokens that represent a unique good or asset, like digital art. They can be sold in auctions for collectors to bid on or purchase, and the sale of NFTs unlock new revenue streams for creators.
In economics, a fungible asset is something with units that can be readily interchanged – like money. You can swap a £10 note for two £5 notes with money, and it will have the same value.
However, if something is non-fungible, this is impossible – it means it has unique properties, so it cannot be interchanged with something else. It could be a painting such as the Mona Lisa, which is one of a kind. You can take a photo of the painting or buy a print, but there will only ever be one original painting.
NFTs are “one-of-a-kind” assets in the digital world that can be bought and sold like any other piece of property, but they have no tangible form of their own.
The digital tokens can be thought of as certificates of ownership for virtual or physical assets.
When a collector buys an artist’s piece as an NFT, they’re buying the unique token representing the digital artwork. Ownership is then recorded in a tamper-proof way by the token.
Owning the work doesn’t restrict how the work can be seen or shared; instead, it works more like an interactive trading card — each piece can be distributed and traded among collectors, rising in value in the process.
Owning an NFT gives the buyer the right to re-sell the piece, just like in the traditional art world. The difference is that the artist could earn a cut of every secondary sale (i.e. any time a collector re-sells their work to someone else for a higher price).
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