What Is an NFT?
Introduction to NFTs
Non-Fungible Tokens (NFTs) are unique digital assets that exist on a blockchain, representing ownership of specific items or content. Unlike cryptocurrencies such as Bitcoin or Ethereum which are fungible and can be exchanged on a one-to-one basis each NFT is distinct and cannot be replicated or replaced with another token.
Understanding Fungibility
Fungible Assets: Items that are interchangeable because they are identical in value and properties. For example, one Bitcoin is equal to another Bitcoin.
Non-Fungible Assets: Unique items with individual characteristics and value. Examples include artwork, real estate, and collectibles.
How NFT Technology Operates
NFTs leverage blockchain technology to provide a secure and transparent method of establishing ownership and authenticity of digital assets. Here's how they work:
Creation: Artists or creators create NFTs by encoding their digital assets onto a blockchain, such as Ethereum.
Blockchain Ownership: Each NFT has a unique identifier and metadata that cannot be altered, ensuring the asset's originality.
Smart Contracts: NFTs utilize smart contracts to define the ownership and transferability of the digital asset.
Trading and Transfer: NFTs can be bought, sold, or traded on an NFT marketplace, with each transaction recorded on the blockchain.
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