A non-fungible token (NFT) acts as a digital representation to prove ownership for a digital good backed by blockchain technology.
The term “token” in the phrase “non-fungible token” refers to this digital representation. “Non-fungible” simply means “non-replaceable”. It can’t be replaced, is one of a kind, and is always unique.
For example, a single U.S. Dollar note of $1 is fungible because it is able to be replaced with another $1 note. However, each NFT is always unique and cannot be simply swapped for another different NFT, even if both are a representation of the same general good. This means that non-fungible items can be far more valuable than fungible items.
Minting an NFT
Creating an NFT is known as “minting”. Minting an NFT is the process of taking a piece of content and putting it on a digital registry, or the blockchain. During this process, some critical information such as owner name, date, and time is placed on the blockchain. The most common blockchain for minting NFTs is Ethereum. A person can manage any NFTs that the person mints or owns through a crypto wallet.
A crypto wallet is a digital wallet used to store cryptocurrencies and NFTs. They are the only place where NFTs can be minted or purchased. The ownership history of an NFT is easily traceable, verifiable, and can be seen by anyone using the blockchain.
As of now, NFTs are most often used to prove ownership over a digital good, but they have many other potential uses yet to be explored in an ever-growing market.
The amount of electricity consumed for regulating and verifying blockchain transactions leads to massive carbon emissions. It’s estimated that a single NFT transaction (minting or selling) can emit an average of 40kg of CO2.