A non-fungible token (NFT) is a unique, individual token existing on a blockchain such as Ethereum. Unlike cryptocurrencies like bitcoin, each NFT token contains unique data meaning non-fungible tokens are not interchangeable with each other. This non-fungible nature of the tokens means their use cases differ greatly from their fungible counterparts.
A fungible token can be exchanged for the same type of token equally without any difference. A good example is a dollar -
If you and I both have a dollar — we can swap dollars and it doesn’t matter, neither of us lose out they are equal. Whereas, with non-fungible tokens they are both unique, meaning if we both have an NFT, mine could be a baseball card, and yours could be your Birth Certificate — obviously we cannot exchange these two equally. Therefore making our tokens non-fungible.
Non-fungible tokens are used to create verifiable digital scarcity. NFTs are used in several specific applications that require unique digital items. This has initially proven popular for blockchain games and collectibles like CryptoKitties on the Ethereum blockchain. NFTs can also be used to represent in-game assets, which are in control of the user instead of the game developer. One exciting benefit of this arrangement means the non-fungible tokens or digital items, may actually outlive the game they were initially created for and find incorporate into separate future games. Yet another potential use is in digital art, by helping prove authenticity and ownership.
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