NFT stands for “non-fungible token”. A “fungible” asset refers to something that is interchangeable with another unit of that same asset. A good example of a fungible asset is the US dollar. If I exchange my $1 bill for your $1 bill, nothing really changes. Both bills represent the same exact value. That’s fungibility.
Conversely, a non-fungible asset refers to something with distinct value. There are no two that are exactly the same. A good example of a non-fungible asset is a house or a car.
A non-fungible token is where things get really interesting. Blockchain technologies allow us to implement many radically new ideas that weren’t before possible. A non-fungible token allows us to create a digital certificate that represents a unique asset. We can attach these tokens to pretty much anything, including digital files—say, a photo, a video, an audio recording, or even this article.
This allows us to create proofs of authenticity for digital content that can be owned, bought, sold and traded. Because these tokens are stored on an open and distributed blockchain (such as Ethereum), their embedded metadata and transaction history are completely verifiable by anyone in the world with an Internet connection. That means we can all know what digital wallets own what tokens at any given point in time.
The implications of this are truly infinite, and we’ve just begun to scratch the surface of possibilities. Token gating is one example of how projects and companies are giving NFT ownership more meaning.