The world of cryptography finds itself in a moment of pure excitement! With cryptocurrencies like Bitcoin and Ethereum reaching new heights and widespread adoption of blockchain and smart contract technology, it's safe to say this excitement is justified. All this excitement, though, has somewhat obscured the rise of non-fungible tokens—or NFT. But what exactly are these tokens and what makes them non-fungible? Let's find out.
Before we discuss what it means to be non-fungible, we must first understand what it means to be fungible. In economics, fungibility refers to a good or commodity whose units are considered interchangeable, and each of its parts are indistinguishable from each other. The most classical example of this is gold (or really any other precious metal). Gold is fungible because two specified amounts of pure gold are equivalent to each other, regardless of the state they're in. Cryptocurrencies are generally considered fungible: one Bitcoin is equal to another.
Non-fungible tokens are digital assets that contain any identifying information which can be recorded within a smart contract. This is what makes each NFT unique, so they cannot be directly replaced by another token. Since no two NFTs are alike, they cannot be swapped like-for-like. Fiat currency, on the other hand, holds the same value: a $20 note is worth $20. Also, non-fungible tokens are not divisible. Much like tickets to an event, half of a ticket isn't really worth anything.
In short, two Bitcoins are considered interchangeable from each other; by design, every NFT is inherently unique, so the one you buy will be different from the one I buy.
A piece of gold's value is based on the amount of gold it contains, which makes it fungible. NFTs are NOT like this.
Non-fungible tokens' rise in popularity is often attributed to a game called CryptoKitties, a 2017 Ethereum-based game developed by Dapper Studios about buying, breeding, and selling virtual cats. Because of this, NFTs are closely linked to blockchain's application for gaming. There are currently two major standards for NFT: the ERC-721 Standard (which CryptoKitties uses) and ERC-1155 Standard, which is newer and can be used to build ERC-721 assets.
But the excitement around NFTs, though, really arose quite recently and some companies and people have come up with innovative ways to use them. In December 2020, Nike filed a patent for blockchain-based NFT-shoes called "CryptoKicks." The rock band Kings of Leon was featured in Rolling Stone Magazine for releasing their album When You See Yourself exclusively as non-fungible tokens. While musician Grimes sold approximately $6 million worth of digital art via NFT.
To say the future is bright for NFTs and the possible use cases for them is undeniably an understatement. With millions of dollars' worth of intellectual property and ideas being exchanged through this medium, we're certainly excited to see what NFTs will do in the future. If you're interested in creating and using non-fungible tokens, alongside other smart contract applications, the intuitive SIMBA platform is equipped to meet your needs!