If you are keeping yourself updated in this world of growing technology, and you continuously follow social media and the news, you might observe that many people are talking about something called NFT. But what is NFT, and what does it mean, we are going to understand it in general terms.
In this article, we are going to talk about what is NFT, and we will explore NFT a little bit.
What is NFT and How Does NFT Work?
What is NFT? and the Full Form of NFT
So, first of all, let me reveal the full form of NFT (which is probably already known to you, but anyways), and it is … Non–A fungible Token. Wait… these words seem to be quite weird, don’t they?
Well, let’s just break those words down, and understand what they mean, so that we get an idea of what the Non–Fungible Token means.
Let’s break down this whole thing into two different terms, one of which is Non–Fungible, and the other one is token.
Now, it’s time to understand these terms, one by one, and first of all, let’s consider understanding the term Non – fungible.
What does Non-Fungible mean?
Well, whenever we do not know the meaning of some word, we just go to the internet, find the meaning of the particular term, or find some alternative word for it, just to make things seem simpler. Just like any other clever person on the planet, I did the same thing, and things just seemed to get simpler. We are not going to replace the word Non, because it is already known to me, but maybe let’s see some word, which can replace the word Fungible, and that word is actually Replaceable.
So, finally, we can say the Non-Fungible, is Non-Replaceable. I think now it is quite easy to understand, what we mean by Non-Replaceable. This simply means that something cannot be replaced, or something is unique.
Now, let’s head to an example, which would make the idea of the term Non-Replaceable much clearer.
Examples of NFT
Let’s say that you have a 100 Rs note, and your friend also has a 100 Rs note. You decide to exchange the notes. Now, if you exchange notes, there is no problem. You and your friend, both have 100 Rs only. So, in this case, the currency is fungible, which means that it can be replaced.
Or let’s say that you have a 100 Rs note again, and you want some change, against this sum. So, you get 10 10 Rs notes, as a change against that 100 Rs. But the value that you have is still 100 Rs. So, you can see that the currency here is fungible.
Now, to explain what is non-fungible, let’s come to another example. Let’s say that you have some collectible item, like some rare artwork, or anything that is rare, or unique, like some vintage car, which is rare, or let’s say unique. Now, if someone comes and asks you for this car, against some brand new car, would you give it away? Well, if I were you, I would never give the car away so easily.
So, simply speaking, Non-Fungible means something which is non-replaceable or something which is unique.
Now, let’s get to the next term, which is taken. So, a token is nothing but proof of ownership. So, this is like you have something unique, and you have a token, which is basically proof of ownership.
So, a Non-Fungible Token is simply a token, which is used to represent ownership of some unique item. There can be only one official owner at a time.
So, what is an NFT anyways? We understand that the NFT is some token, which represents the ownership of a unique item. But how does it work? Well, blockchain technology is behind it. We will soon understand in brief about blockchain technology, so do not worry!
So, the NFTs are the tokens, which can be used to represent ownership over some unique items. It can be some artwork, like some music, some painting, or something unique in the sense. It can have only one owner at a time, and due to blockchain technology, it is not possible to modify the ownership record.
So, now, both the terms, the Non-Fungible, and the token, are explained. But still, this feels empty. So, let’s get a little bit into the details of how does this all work? Because, just understanding the terms, won’t get the classic idea.
So, all this is possible due to a very amazing technology, which is Blockchain. So, let’s understand the technology a little bit. Well, if we look at the name, Blockchain, this basically seems to be a chain of blocks. In fact, it is! There are many cryptocurrencies based on Blockchain technology.
Let’s say that you go to the market, and you buy something, let’s say, chips! and now you need to pay the price, so you do an online payment. Now, while you are doing an online payment, what is happening? Well, when you requested the transaction, the bank first checks whether or not you have a sufficient balance so that you can pay, and if you have, the transaction is then approved, and then the money is transferred, and it is checked in the beneficiary’s bank, that he/she has got the money. So, this all is recorded by the bank.
But here, in the transaction between you and the shopkeeper, the bank is there. This is the centralized banking thing. But just imagine, if there was some technology, where the transaction taking place between you and the shopkeeper is decentralized, which means that it has a public record and complete transparency. This means that you transferred some currency (let’s call it token now), to the shopkeeper, this was stored as a public record. This means this record is decentralized, which means that it is on various systems in the world, and it is updated everywhere.
So, when you do the transaction, it is checked into the public record, whether or not you have sufficient balance, and then the transaction is recorded there.
So, basically, this is the blockchain, in brief. Now, let’s come back to the topic that we were on, which is NFT. So, let’s say that you have some NFT that you want to sell. Now, you have a buyer, and he bought the NFT. So, first, it would be checked that the buyer has the balance to pay, if yes, the transaction is approved, and then there is a record that the buyer paid you against the NFT. Well, the prices of the NFTs depend. Some NFTs are sold for millions of dollars.
So, to summarize, the NFTs are tokens, which represent the ownership of some unique items. If you are interested, you can explore more about NFTs and try to make your own, or you can also buy one. However, we do not recommend or promote any NFT, and you can do it completely on your own.
FAQ About NFT (Non-Fungible Token)
Ans: The full form of NFT is a Non-Fungible Token.
Ans: NFT is a token, which is used to represent ownership of some unique item.
Ans: Yes, you can create your own NFT. You just need to have something that is unique.
Ans: The NFTs are typically based on the Ethereum Blockchain, although, there are some other blockchains, which support them.