NFT stands for “Non Fungible Token”.
Fungibility is a property of money. Every physical coin in today’s world needs to be identical. This is what is called fungibility.
For a real world example, imagine a microphone that was used by Michael Jackson just before he died. This microphone is Super Non Fungible. It's different from ordinary microphones or even microphones of the same brand and model, and its value is certainly very different because Mchael Jackson used it before he died.
This microphone would be “Non Fungible” as it is unique in the world; it is one-of-a-kind. But how can we upload this microphone online?
Suppose we just take a photo of it and upload it to the standard internet. That photo can be copied infinitely. Users can simply use ctrl+c or ctrl+v to save it to their computer and repost it online. Consequently, that photo has no value.
So how can we digitize this one-of-a-kind microphone so that it remains unique and retains its value?
We use a technology called Non Fungible Token (NFT) which represents one single, unique unit that can be used to represent digital art, paintings or Michael Jackson's microphone, intellectual property, things with sentimental values, and experiences that money cannot buy.
We can tokenize them and upload them into the online digital world as well.
NFT and Fungible Tokens form the backbone of the Metaverse.
We cannot digitize bank notes and move them online into the virtual world at the moment because of the current centralized financial system. Their format cannot be changed. Bank notes, in today’s world, have to be fungible tokens. Blockchain is driving “Decentralized Finance” or “DeFi” which has already disrupted the financial sector and will continue to do so.
Cryptocurrency is used virtually. In the future, there will be two kinds of digital value, fungible and non fungible, just like in the real world.
The digital world too will have two kinds of token, using the two technologies:
- Fungible Token Market and,
- Non Fungible Token Market