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Non-Fungible Token (NFT)

By: Margaret Rouse | Reviewed by Kuntal ChakrabortyCheckmark | Last updated: May 20, 2021

What Does Non-Fungible Token (NFT) Mean?

A non-fungible token (NFT) is a programmable unit of unique data that cannot be changed once it has been recorded in a distributed ledger. Because NFTs are recorded as part of a blockchain, they can be easily tracked to verify the authenticity and history of a specific digital asset.

Just like baseball cards and comic books, there's a collector’s market for NFTs. In the early part of 2021, NFT marketplaces (also known as exchanges) began to attract attention from investors after Christie’s auction house sold a non-fungible token for $69 million.

NFTs are created through a pay-per-use process called minting. Many of the online services that people use to mint NFTs also act as marketplaces where non-fungible tokens can be viewed, bought and sold.

Editor's Note: NFT is also a well-known acronym in computing for network file transfer.

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Techopedia Explains Non-Fungible Token (NFT)

To date, companies and creators have developed a wide variety of NFTs for:

  • Digital artwork
  • Digital music
  • Virtual real estate and other digital objects used in games
  • Upselling physical consumer consumer products like sneakers
  • Video clips

NFTs and Intellectual Property

It’s important to remember that the person who buys an NFT is not purchasing a physical asset. Instead, they will simply own an encrypted token (symbol) in a blockchain that represents the original physical or digital object.

Typically, when a physical asset like a painting has been digitized and turned into an non-fungible token, the painter retains both intellectual (IP) and creative rights to the physical object, but such rights do not automatically apply to digital assets.

Because NFTs can be coded, however, developers have the ability to make sure the original artist can be paid a royalty when an NFT is sold to a new buyer. This can be an important consideration for investors and collectors.


How NFTs are Created and Sold

As of 2021, OpenSea, which use the Ethereum protocol, is one of the most popular cloud services for creating NFTs. According to their website, OpenSea is the first and largest marketplace for user-owned digital goods backed by a blockchain.

Other well-known NFT Exchanges include Mintable, Nifty Gateway and Rarible.

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