Non Fungible Token (NFT)
A non-fungible token (NFT) is a way to assign ownership to asset on the blockchain. It is implemented using a smart contract; on Ethereum the standard is defined by ERC-721 and ERC-1155.
An easy way to think about the distinction between NFTs and a cryptocurrency is that currency is fungible, i.e., you don’t care about one unit or another. For example, if you have a dollar bill you’re normally willing to exchange it for any other, regardless of the serial number on the bill; this is what makes it fungible. A non-fungible asset would be a house you live in—it has unique properties that make it distinct from all others. Similarly, the title system for real estate is a non-digital means of tracking ownership that is a helpful metaphor for NFTs.
Unlike virtual items that existed before NFTs, the blockchain enables several capabilities that didn’t exist previously: permanence; decentralization; trustless programmability; provable provenance; provable scarcity. The result is a new class of disruptive applications, artwork and gaming—as well as new business models including play-to-earn and others built around decentralized marketplaces.
Reading Guide
Why do play-to-earn games work when real money trading in games has (mostly) not worked? (Jon Lai)
How to Approach the Generative Art Boom (William Peaster)
Into the Void: where Crypto Meets the Metaverse (Piers Kicks)
NFTs and a Thousand True Fans (Chris Dixon)