It seems many people still do not understand what an NFT is. Some people think it’s artwork, other people think it’s an extreme environmental hazard. I’ve seen many over-simplified explanations and many overly complicated ones. So I thought I might step in and put it in layman's terms.
Fungible vs Non-fungible Tokens
You keep hearing that phrase, “non-fungible token”. It makes you wonder why crypto people can’t just speak English. But all fungible means is “interchangeable”. Two apples are fungible, meaning they are equal to each other in their parts and their value. In that same way, Bitcoins are fungible tokens. Each one looks the same and has the same value.
Imagine you have ten pennies. All fungible. Now cut one of them into a star. That one is now non-fungible. It isn’t interchangeable with the others. That’s an NFT. It’s not art; it’s not the thing that it represents. It’s a unique token that is assigned to a thing of your choice. Imagine it like an ID number or a sticker you put on your laptop.
Can an NFT be copied?
Now that we know that the concept of an NFT refers to two separate entities, the token and the object that the token is assigned to, we can answer this question properly. First, no, the NFT token cannot be copied. Imagine you have ten pennies, and that ten other people have ten pennies as well. You all cut one into the same exact star. This more accurately represents an NFT on the blockchain.
We are all looking at the same star penny, and no single one of us is allowed to change it without changing everyone else’s penny too. If I cut one of the corners off of mine without approval from everyone else, my change will be rejected and the consensus of what the star is remains the same. NFT’s are incapable of being hacked, copied or destroyed, not because the code is so amazingly complex, but because you would have to hack every single person’s computer at the same time. Well, 51% of them, anyway. That’s a different conversation.
On the other hand, the digital art that is attached to the NFT can possibly be copied in a screenshot. But in the same way, a forged Mona Lisa doesn’t go for the same price, a screenshot of a piece of art without the NFT as proof that it’s real isn’t worth much. Why is a perfect forgery of the Mona Lisa hardly worth anything? It looks the same, right?
The answer is who knows? Art is art. People want the originals. That’s how it works.
The NFT proves that a digital asset is the original asset and not a copy.
Is the NFT market a bubble?
This is a good question, and the answer is a little bit of yes but mostly no. If you’re looking at the situation from the outside, all you might see is highly-valued novelties that may or may not hold their price in the future. While I do believe that many of the pieces with wild price tags will go down in value soon, we can’t forget the stubborn nature of the art world. There may be a crash, but it won’t be very extreme.
NFT’s have far more value than being attached to artwork, though. For example, Crypto Kitties makes digital cats into NFT’s which can be raised, traded, and even bred. It’s a pretty fun way to use the technology, and led the way for NFT use in gaming, namely collectibles.
And there are going to be very many other ways that NFT’s are used as we figure out how versatile they are. After all, they finally solve the problem of scarcity, uniqueness, and indestructibility in a digital world. They almost reproduce these real-world qualities even better than their physical counterparts.