What is a Non-Fungible Token?
The full form of NFT is Non — Fungible Tokens. There are main two key words , ‘’Non-Fungible” and “Tokens”. Lets start with non — fungible , if I would have to simply express it then, to replace the word Fungible, I would use the word “Replaceable”. This means “Non-Replaceable”.
Lets start with an example, Now let us take a book, this book has a million copies because this book was mass produced, so each and every copy is the same, that means if you buy this book from Amazon on day one, and then on day fifteen you go to an offline bookstore or seller and buy another copy , then there will be no difference between theses copies. They will be of same price, same content . same no. of pages and that is why you have got the exact same copy. That means this book is replaceable, you can replace this book with any other book at any point in time, and that makes it a replaceable asset.
But the book that I have with me is unique. This book is unique because I have read this book , while reading I have highlighted many things in this book , I have put in a lot of post-its, which means this particular copy with me of this Book is not replaceable. You can not buy this particular copy from anywhere else because it has my notes and highlights and that makes it unique and “Non-Replaceable”.
Now let us come to the topic of tokens ,
Tokens are basically riding on something called the blockchains.
What is the meaning of Blockchains?
Let us assume that I bought a book from you, this book is of $2 and you are a shopkeeper, I went to your shop and say that I want this book . Then I just google pay you on your UPI id , $2 comes on my screen I insert my pin and $2 is your bank account. Now this transaction was very easy but many things happened in the background. When I scanned it and entered my pin to pay 2 dollar, at that very second the bank checked whether I have 2 dollars or not, and if I have it then they say transaction approved. When it gets approved the $2 were transferred from my account to your account and your bank registered that you have got $2 dollar from someone, and this entire transaction was recorded but all of this is happening at a bank level. So the Bank is keeping a record of every transaction that is happening at your end because you have an bank account. This is called “Centralization way of Banking.” And money is such is unlimited , as its just a paper and government can print is as many times as they want to, as it the value of your money can reduce at any point in time because a lot more money has been printed.
Now in 2008 , a person named Satoshi Nakamoto. He said that can we transform this centralization world into decentralized world. This means if i gave you $2 dollars to buy the book , then a ledger was created , can that be a public record ? , this means that the bank is not the owner of this but the whole public is the owner. And that was the concept of Blockchains.
When I give $2, actually 2 tokens ( it is the name for currency in the blockchain world ). When I gave you 2 tokens some has to first check whether I have 2 tokens or not , now that someone is not the one person or one institution , its the entire world theoretically. Million of computers all around the world will simultaneously check whether I have 2 tokens or not. If I do not have it they will say, transaction disapproved and a record will be created for the same and if I have it then they will say transaction approved. And my 2 tokens will be transferred in your account and it will be recorded forever and ever , nobody can erase it and no one can edit it , and that is the concept of blockchain.
How is Block Chain connected to NFT?
Let us come back to the book, now this book has my highlights ,my notes and that is why there is only one of this kind. If I would want to sell this book and you would like to buy this book, lets say I want to sell it for $5. If you want to own this , there has to be a way to prove that you own this. Now what if it was an image, a movie clip, a movie poster etc. how do you prove the owner ship of that one unique piece. It is by creating an “NFT”.
That is how NFT work , they are a legit way of transferring the ownership of an item in such a way that your ownership will always be on record , it would be proven, and it can never be edited or deleted.
Why are they even Valuable?
Now if we consider this , we will think that , I could easily download the image from online web for work, I don’t know who is the owner and it don’t matter.
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