Non-fungible tokens (NFT): everything you need to know about NFT

Non-fungible tokens (NFT): everything you need to know about NFT

Non-fungible tokens (NFT) are unique digital items with verifiable blockchain ownership. Examples include collectibles, gaming, digital art, event tickets, domain names, and physical asset ownership records.

As a marketplace for NFTs, OpenSea has a unique advantage: we've seen almost all NFT-related projects that have been launched since late 2017, when the first NFT standard emerged. In fact, we're willing to bet on the Gods Unchained card that if you ask us about the NFT project, we've heard about it and probably talked to the developers at some point! The NFT ecosystem is a close-knit group of innovators, from enthusiasts to developers, gamers and entrepreneurs to artists. We are honored to be part of this community.

This post provides a detailed overview of non-fungible tokens: the technical anatomy of ERC721, history of NFT, common misconceptions about NFT, and the current state of the NFT market. We hope that this will be relevant both for beginners in this area and for those who already know about NFT, but want to better understand the nuances of all internal processes.

What is a non-fungible token?

Non-fungible assets are normal things. Fungible assets are strange!

Most of the discussion about non-fungible tokens begins with the idea of ​​fungibility, which is defined as "the ability to replace or replace with another identical element." We think this complicates the situation. To better understand what counts as an indispensable asset, just think about most of the things you own. The chair you sit on, your phone, your laptop - anything you can sell on eBay. All this belongs to the category of non-interchangeable things.

It turns out that fungible assets are actually very strange. Currency is a classic example of a fungible asset. Five dollars is always five dollars, regardless of the serial number on a particular five dollar bill or whether the five dollars is in your bank account. The ability to replace a five dollar bill with another five dollar bill (or five one dollar bill, for that matter) is what makes the currency fungible.

Note that interchangeability is relative - it really only applies when comparing multiple things. Consider business, economy and first class tickets. Each ticket is roughly interchangeable within its class, but you cannot honestly exchange a first class ticket for a business class ticket. Even the chair you are sitting on is roughly interchangeable with a chair of the same model, unless you have developed a special adaptation for your particular chair.

Interestingly, fungibility can also be subjective. Returning to the airline ticket example: the person who cares about sitting at the window and not at the aisle may not consider two economy class tickets interchangeable. Likewise, a rare coin may be worth 1 cent to me, but much more expensive to a collector. We will see that some of these nuances become important when representing these elements in blockchains.

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