Some tokens are more unique than others; in fact, some can only be used once! These are called non-fungible tokens, or NFTs, and they’re used as key elements in crypto games and collectibles. But how do you know if you should implement NFTs in your project? Read on to find out how NFTs work and which ones are worth your time and money.
NFTs represent digital scarcity
The purpose of NFTs is to give unique digital assets—tokens, or in-game items, such as Cryptokitties (CryptoKitties)—the ability to be traded and transacted on a public blockchain. Each NFT is associated with a particular asset that is represented on a particular ledger (or blockchain). This gives users a way to interact with their chosen applications in ways that feel familiar.
NFTs have unique identities
Just like people have unique names, NFTs have unique identities. Unlike fungible items, which can be replaced by other instances of itself (like digital money), NFTs are unique items that can’t be duplicated or replaced by another one with a different identity.
NFT ownership cannot be disputed
Unlike with fungible ERC20 tokens, ownership of an NFT is not determined by a public key. Each one is unique in some way. The fact that each token represents something different means that it’s less likely to be disputed: how can you argue over who owns which token if it represents something specific, rather than just being a string of numbers and letters.
NFT ownership can be transferred
NFTs can be transferred from one party to another. This is in contrast to fungible tokens like Bitcoin, which are designed so that each token has a universally identifiable digital fingerprint, making it easy to verify ownership. However, with NFTs you cannot tell one item from another—they lack any branding or unique identifier. As a result, ownership of an individual token cannot be easily verified by third parties.
There is no central registry
If you want to own a unique digital kitty on one of these platforms, you’ll need to purchase it from someone who already owns it. This means that NFTs can’t be traded on a cryptocurrency exchange. To sell your special kitty, you’ll need to privately negotiate with someone who wants it — possibly via an open marketplace like Rare Bits — or trade it back in for a widely tradable token (like ether) through an approved exchange.
