What makes an NFT an NFT?
What does fungible mean?
What's the deal with scarcity?
How do I know which sources to trust?
Can't I just take a screenshot and "own" it?
Above are just a few of the long list of questions that a curious mind should and will have when first discovering the world of NFTs. And let's face it. Most of us are new to this world, because guess what. It's new. No need to beat yourself up about it though. Let's talk through the basics: What are NFTs?
Non-Fungible Tokens
They are non-fungible, and they have something to do with the future. Oh yeah, and I can make money creating, buying and selling them.
So you're good now right? You understand what NFTs are from the above definition? Didn't think so.
Still, that's the way this brilliant (usually blockchain) concept is presented to most people, and they get stuck pretending that they understand. While there may be some high-and-mighty blockchain gurus and experts out there who will tell you hurtful things like "you just don't get it" and "you're already late to the party," you should always remember that they are not your friends.
The snobby and tech-savvy underexplainers will simply do their best to make themselves feel special by making you feel small. After all, this is their time (at least from their perspective), and they will make sure that no foolish noobs can take their opportunities to exploit, capitalize and profit. It's rather pathetic, and I pity those who think that if a single person wins, a hundred more must lose. This is a world of abundance, and extraordinary things are always happening; All we must do is take a little time and energy to learn and grow.
What is an NFT?
The concept of non-fungible tokens is much simpler than you may think. First you must understand what a fungible token is. Let's go a bit further (but not much) than a token than can funge. Words are my weapons, my muses and my life, so I always go first to the source: the word itself.
Latin
fungi = to perform
Ibilis (suffix) = able to be
fungi vice = to take the place
These three ideas were combined in the early 19th century into fungibilis - "Capable of being used in place of another"
A US dollar is simply a fungible currency - although individual notes have printed serial numbers, each dollar is the same as each other dollar. They are each fungible in that they are capable of being replaced by another.
This means that a Bitcoin is an example of a fungible token. If I have a bitcoin and you have a bitcoin, I can send you mine and you can send me yours, but we will both then have the same thing we had in the first place. The word "token" comes from the Old English tacen, which means symbol or evidence. This word was not even used to describe a unit of currency (coin) until the late 16th century. Before that, it was used as in the expression "by the same token," meaning introducing a corroborating circumstance.
So given all the above information, a fungible token is a symbol that is capable of being used in the place of another.
Pat yourself on the back, for if you were reading along, you have just practiced etymology, the powerful art of learning through the origin of words. I'm not afraid to say that this art has always been one of my most secret weapons. When you look at the history of a word and its origins, you are able to arrive at a concept that is truer than anything that a snobby underexplainer can tell you.
Now that we know what a FUNGIBLE TOKEN is, it should be fairly easy to add the prefix "NON" to understand the difficult concept of NFTs.
Non (from Latin) = not, by no means, not at all, not a
NON-FUNGIBLE TOKEN...
A symbol that is by no means capable of being used in the place of another.
Quick Look at BTC
It took a little detailed word analysis, but we got there. When comparing non-fungible to fungible tokens in terms of cryptocurrency, the difference (although small) is very meaningful because it expands the concept of scarcity.
Bitcoins are scarce in terms of total supply and circulating supply only. Those of us who know bitcoin know that only 21 million BTC will be mined, then they will simply be in circulation. Even the graphic below is somewhat misleading. When you mine something, you are merely discovering it from somewhere hidden, which is exactly what happens when bitcoins are mined. Instead of buried in a mountain or embedded in a rock, they are "mined" through solving complex mathematical problems and creating blockchain transactions.
image from www.buybitcoinworldwide.com
While each bitcoin transaction carries with it the entire history of all bitcoin transactions, every bitcoin is the same as every other. This is what makes BTC a fungible token.
NON-Fungibles (Art, Collectibles, Trading Cards, etc.)
To better explain the concept of non-fungible tokens, I will use one of my favorite examples: KOGs by RFOX Games. Check them out if you haven't yet. They will play a HUGE part in the future of NFTs, blockchain and DeFi.
This is a KOG.
Take note of a few things about this digital asset. First, it has a name and an ID number (like a serial number), but these alone do not make it an NFT. It was minted with immutability (cannot be changed by its creator) using the web 3.0 protocol of IPFS hashing (Inter-Planetary File Sharing). That aspect gets us closer to NFT, but what seals the deal is THIS:
Proof-of-scarcity is built in to the asset in the form of a mint number. This means that 63 of this art/border combination have been created so far (found by collectors when opening packs), and of those 63, this specific one was the 11th.
Collectors are usually clamoring for elusive number 1 mints, especially of assets that are created in large numbers. But in the interest of staying ahead of those collectors, new NFTs companies have come up with many clever ways to make sure that more number ones exist. It is entirely up for debate which school of thought is better. I believe that when fewer exist, they will always carry higher values, so either view can be correct (or incorrect if taken too far). KOGs has done it just right.
KOGs is just one example that I have used to give an idea of what makes a token non-fungible. There are lots of others out there. When most investor, collector and crypto enthusiastic types out there today are talking about NFTs, they are most likely referring to some form of digital art. Art can be traded and collected on platforms like Opensea, Rarible, Mintable, SuperRare and NFT Showroom (to name a few).
My recommendation is NFT Showroom to begin, and for several reasons. First, you can purchase art for reasonable prices there using gas free transactions. I despise the fact that everyone simply accepts exorbitant and ever-changing Ethereum Network fees as a necessity of transacting. There are (and have been for years now) alternative blockchains that allow fast and free transactions. This is the secret of Splinterlands, HIVE and NFT-Showroom, and while we have done our best to make the secret known, many still do not get it. You do not need to throw money away to simply transact on a blockchain. This is why art can be more affordable on NFT-Showroom. This is why Splinterlands cards can trade all day long for pennies.
You can also sign into NFT-Showroom with your HIVE account, the same account that is created when you join Splinterlands, but you will need HIVE to make purchases there. Fortunately, HIVE can be purchased on several major exchanges, like Bittrex.
I hope that you now have an in-depth understanding of the seemingly "simple" concept of fungible vs. non-fungible. Sometimes it takes more than hearing the same quick and concise explanation over and over to really bring it home.
I will further explore these concepts in upcoming articles right here on NON-FUNGIBLE STEW! Thanks for reading and learning with me!
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