What is a NFT?

The abbreviation NFT stands for Non-Fungible Token. NFTs are not interchangeable. An NFT is, therefore, a digital object that can be assigned to a person. Each NFT is unique! This is an essential difference to well-known fungible coins and tokens such as Bitcoin or Ethereum. All coins and tokens are the same as classic cryptocurrencies – not so with NFTs.

To explain, we take the classic fiat currency euro (even if every banknote is registered). Each euro represents a fixed purchase amount and is fungible – exchangeable. It is, therefore, irrelevant which 100 euro note is used when paying. All notes of the same denomination are freely interchangeable. In contrast, a real “van Gogh” painting is not exchangeable and, therefore, not fungible as it only exists once. The painting differs from other van Gogh paintings and other artists – it is unique.

NFT shake hands

An NFT is just as unique and, in this case, documents ownership of a work of art – whether digital or physical. The NFT represents an entry on the blockchain that records the ownership of goods and products of all kinds. Similar to the land register entry for real estate. This means that an NFT is not a coin but a non-erasable, transferable certificate that can be traded against cryptocurrencies.