NFT is an acronym for “non-fungible token.” Fungible is an English word that means “being of such nature or kind as to be freely exchangeable or replaceable, in whole or in part, for another of like nature or kind.” To give an example, if I trade you my $5 bill for your $5 bill, nobody made a profit. A $5 bill is fungible because it is worth exactly the same as any other $5 bill.
So, if something is non-fungible, it is not worth the same as something that is identical or similar to it. For example, if I offered the Louvre my poster of the Mona Lisa for their Mona Lisa painting, they would have security throw me out. The Mona Lisa is a unique painting created by Leonardo da Vinci and is considered a priceless work of art; a poster of the Mona Lisa is a cheap, mass-produced item. The Mona Lisa is therefore non-fungible because even identical paintings of the Mona Lisa are not considered equal in value to it.
A non-fungible token is a digital version of this idea. The token is an entry in a blockchain, meaning it is an item entered in a digital database. It has a unique identity that can be traced so you will know which version of it is the original. The token can then be attached to any piece of digital content to track that particular piece of content. If you download a copy of a JPG NFT, the file on your computer will not have the token attached to it and so it is worthless.
NFTs have existed since at least the early 2010s, when Bitcoin traders discovered it was possible to make Bitcoins that had unique identities. However, NFTs didn’t really become popular until around 2017. In that year, two different collectible items, known as CryptoPunks and CryptoKitties, were distributed using unique blockchain tokens to identify the originals. These digital collectibles suddenly became incredibly valuable, with some of them selling for over $1 million a piece.
In 2021, NFTs really started to capture mainstream attention after the respected auction house Christie’s announced it would auction an NFT created by digital artist Beeple. The NFT took the form of a JPG file depicting a collage of photos. Christie’s set the starting bid at $100. By early March, the bidding had reached $13 million.
NFTs gained further mainstream exposure during that same time when the band Kings of Leon announced they would sell their newest album as a NFT. The album would also be available to buy as usual in non-NFT form, but the (more expensive) NFTs of the album would be linked to special perks such as digital artwork or free concert tickets.
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