They're bought and sold on NFT marketplaces. While dedicated marketplaces such as OpenSea and Rarible have hitherto dominated the field, recently some of the leading cryptocurrency exchanges have begun to muscle in on the space. They can represent everything from virtual land parcels to artworks, to ownership licenses. How are non-fungible tokens used?Īs well as representing digital collectibles like CryptoKitties, NBA Top Shot and Sorare, non-fungible tokens can be used for digital assets that need to be differentiated from each other in order to prove their value, or scarcity. In March 2021, digital artist Beeple sold an NFT collage of his work for $69 million, making him the third most expensive living artist at auction, after David Hockney and Jeff Koons. Collecting different digital kittens is the point of the game. Each blockchain-based digital kitten is unique if you send someone a CryptoKitty and receive a CryptoKitty from someone else, the one you receive will be a completely different CryptoKitty from the one you sent. However, in recent months some investors have experimented with the concept of fractionalized NFTs, though they remain a legal grey area and could be seen as securities.ĬryptoKitties collectibles were some of the first non-fungible tokens. Typically, non-fungible tokens are not divisible, in the same way that you cannot send someone part of a concert ticket part of a concert ticket wouldn’t be worth anything on its own and would not be redeemable. (Of course, the value of Bitcoin might change during the time of exchange.) You can also send or receive smaller amounts of one Bitcoin, measured in satoshis (think of satoshis as cents of a Bitcoin), since fungible tokens are divisible.
You can send someone one Bitcoin and they can send one back, and you still have one Bitcoin.
Banknotes, in contrast, can be simply exchanged one for another if they hold the same value, there is no difference to the holder between, say, one dollar bill and another.īitcoin is a fungible token. They cannot be swapped like for like, as no two NFTs are alike. It’s this information that makes each NFT unique, and as such, they cannot be directly replaced by another token. Non-fungible tokens are digital assets that contain identifying information recorded in smart contracts.
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