Non-Fungible Token (NFT)

November 18, 2021 - Daniel Dreier

A non-fungible token (NFT) is a digital item which is hosted on a blockchain and contains a unique identifier. That means there is only one like it, and it cannot be replicated. This sets it apart from “fungible” tokens and coins (like bitcoin) which are designed to be used interchangeably.

Currently, NFTs primarily make use of the Ethereum blockchain, and can include graphics or other digital content. Theoretically, they can also be used to represent physical items, much like a title deed.

Because each NFT has a unique identifier and cannot be replicated, NFTs enable the creation of original digital content which can be differentiated from copies. In theory, at least, this ability to uniquely identify pieces of digital content as originals adds a value to virtual items.

An NFT could be compared to an original work of art. Although a work of art can be copied, there can only be one original. Likewise, although the digital content linked to an NFT can be copied, only the original will be linked to the NFT. This means NFTs can be used to differentiate between original digital content and duplicates. At least in theory, this ability to identify originals can add value to unique pieces of digital content.

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Editor Daniel Dreier
Daniel Dreier is editor and personal finance expert at moneyland.ch.