Learn About Non-Fungible Tokens
After completing this unit, you’ll be able to:
- Define and describe a non-fungible token (NFT).
- Understand the purpose and power of NFTs.
What Is an NFT?
NFT stands for non-fungible token. Non-fungible means that something cannot be exchanged for another item because it’s unique. For instance, the Mona Lisa is not equal to Starry Night—they both have unique properties which make them non-fungible. Fungible items on the other hand can be exchanged for one another. For instance, one dollar and one dollar are equal to one another.
So, what is an NFT then? They are tokens that live on a blockchain and represent ownership of unique items. NFTs are digital assets that represent either digital or physical objects like art, music, event tickets, videos, and more. Past just representing objects, they’re backed by smart contracts that allow them to have unique properties such as secondary sales and transferable value.
How non-fungible tokens work:
- NFTs exist on a blockchain, which is a distributed public ledger that records transactions.
- NFTs are blockchain agnostic, meaning they can be built on a variety of blockchains.
- An NFT is created, or “minted,” from digital objects that can represent both tangible and intangible items.
- NFTs can have only one owner at a time. An NFT-unique data makes it easy to verify the creator, owner, and enables token transfer between owners.
- The creator writes a smart contract that defines the use, royalties, and legal aspects of the NFT.
Now that you know a bit more about how NFTs work and how they are defined, keep reading to learn more about the power and purpose of NFTs.
The Power and Purpose of NFTs
Tracking who owns a digital file is tricky, as it can be copied and distributed in the blink of an eye. It becomes very challenging to identify the original owner when everyone has an identical copy. The NFT that represents the digital asset contains information, including a unique fingerprint of the file, a token name, and a symbol. This token is then stored and recorded on the blockchain.
When the NFT is minted, it can be sold, traded, and owned. Since it is on a public distributed ledger, anyone can track transaction data and see current and past ownership.
A differentiator with NFTs is the smart contract. A smart contract allows a contract to be tied to the asset, and it can be written to accomplish various tasks. These tasks include ensuring creators are paid a percentage of each and every sale, ensuring royalty splits happen in real time, or even dictating how long an NFT must be held before it can be sold. This is a huge step as it removes the middlemen from the process and creates a new market dynamic for creators.
Many other things (like a percentage going to charity) can be written into the smart contracts, and once minted, they will be publicly available on the blockchain for full transparency. A smart contract is not in place of a legal contract for copyright and reproduction rights—that is an additional layer of support the creators outline.
Brand-new experiences are being built around rare digital and physical goods through the use of NFTs, and they can unlock a lot of things for the owners. When you purchase an NFT, you become part of the community—and community is everything. NFTs can be used as proof of membership, granting access to private communities, or proof of ownership and grant owners access to special content.
Through the purchase of an NFT, holders join an inner circle of people around the world who are owners, collectors, traders, and gamers who all came together through a unique NFT project. NFTs also unlock a new type of community, where you are not just a member, but a co-owner. Members are now vested in the success of the community, creating a new powerful dynamic, enabled by NFTs.
Given that any digital thing can be an NFT, there are several use cases one can think of. Some companies have already capitalized on this idea, like launching an NFT system to verify the authenticity of sneakers, and creating NFTs from video clips of monumental sports moments for fans to own the best plays.
NFTs provide access to something one could not easily attain without ownership of the NFT and open the doors to new types of digital experiences. It could be that ownership of an NFT gives you early access to an in-person showing of the NFT artwork at a museum. Or owners acquire a one-of-a-kind characteristic to morph the original NFT, making it more rare and unique. Or you can use the NFT as a ticket to get into the VIP section of a live concert. Or the NFT has a digital twin that, when purchased, sends a replica of the clothing on the NFT exclusively to NFT holders. Some say owning an NFT gives you digital bragging rights, but it’s so much more than that!
Plan Your NFT Journey
If you’re interested in becoming a proud owner of an NFT, don’t be shy. Do some research, find a project that excites you, connect with the community, and show off your new digital identity through your Profile Picture (also known as PFP).
For guidance around trust and safety as you explore this new virtual world—and to learn more about NFTs, Web3, Cryptocurrency, and Blockchain—see Web3: Future of the Internet, which offers an introduction to Web3, an in-depth description of the technologies that create it, and the Salesforce values-led approach to working in the space.
Here’s a small glossary of terms to get you started on your Web3 exploration. We look forward to blazing a new trail with you!
Web 3.0 Glossary
Web3 (Web 3.0)
The next evolution of the internet. It will empower people to read, write, and own both their data and their digital identity.
A chain of blocks that contains information within a public distributed ledger.
A cryptocurrency, also known as crypto, is a digital currency that is designed to work as a medium of exchange through a computer network that is not reliant on a central authority.
A device, program, or service that stores the public or private keys for cryptocurrency transactions.
- Forbes.com: What You Need to Know About Non-Fungible Tokens (NFTs)
- WSJ.com Video: NFTs, Crypto Wallets, and More Explained by Putting My Son’s Art on the Blockchain
- Salesforce Blog: NFTs, the Metaverse, and Digital HQs—Salesforce Execs Share 2022 Predictions
- Forbes.com: Why Big Brands Are Spending Millions on NFTs
- Medium.com: How to Set Up a Crypto Wallet to Buy NFTs