What are Non-Fungible Tokens (NFTs) and what are they used for?

Non-fungible tokens are one of the hottest topics within the crypto space. But if you're new to the topic, it can be difficult to understand what non-fungible tokens are and how they might affect your business. If you're ready for a primer on NFTs, this article is a good place to start.

So what exactly are Nfts?

Non-fungible tokens (NFTS) are different from fungible tokens, which can be easily exchanged for one another. Non-fungible tokens are more specific. They can represent a unique digital asset, like a collectable or a ticket. They also have a number of applications in gaming and advertising.

How are NFTs different from other cryptocurrencies like Bitcoin?

NFTs are completely different from cryptocurrencies like Bitcoin. While cryptocurrencies, like Bitcoin, are a form of currency used to purchase goods and services, NFTs are digital assets that are typically used to represent virtual items or in-game characters and digital art. Cryptocurrencies are also used to purchase NFTs.

Buying or selling virtual currencies like Bitcoin involve a ‘miner’ who solves complicated mathematical equations to unlock new coins that can then be ‘mined’ (i.e., created) by adding more computational power to an application. While some cryptocurrencies are destined to become outdated, like Bitcoin, many others are ‘endogenous,’ meaning they have intrinsic value and can be revalued by market participants.

Buying (or selling) NFTs requires specialized software, which then gives users access to a variety of different virtual items at previously-established prices. In this sense, NFTs are similar to cryptocurrencies but have some key differences.
Unlike cryptocurrencies, NFTs undergo constant revaluation (i.e., inflation and deflation) because of their inherently digital nature. Because they can easily be exchanged back and forth between user accounts, they are subject to the same market conditions that affect cryptocurrencies — including but not limited to price appreciation. Unlike traditional currencies which may be delisted from online exchanges, NFTs can be bought and sold virtually and are subject to instantaneous liquidity. This means users can rapidly buy or sell NFTs with one click in most digital wallets.
It’s important to note that there are some common misconceptions about NFTs and what they can and cannot be used for. For example, some people think that any NFT can be used to buy physical products or services. While that is sometimes true, the restrictions outlined below largely prevent that from happening and have resulted in significant customer adoption and usage of NFTs.
While many NFTs can be used to explore the virtual world in a safe and entertaining way, they are largely restricted to gaming applications.