What are NFT's and how do they work? Non-fungible tokens explained in simple English

What are NFT's and how do they work? Non-fungible tokens explained in simple English

NTF's are built on Blockchain technology. Here's a paragraph or a one-sentence primer on Blockchain before we look at NFT's.

There are many blockchains, but let's use the example of the bitcoin blockchain. Blockchain is a ledger that keeps track of who owns what. Instead of a central entity monitoring transactions, nodes survey Blockchain from all over the world. These nodes are miners. You can think of miners as the workers performing computing maintenance to secure the system that keeps track of the ownership.

Blockchain is a decentralised ledger that keeps track of who owns what.

The Blockchain is immutable; no one can alter the records.

NFT's

NFT = Non-fungible token.

An NFT is fancy Crypto slang, meaning a unique token that lives on a blockchain that tracks something. It could be art or a collectable of some kind. NFT's are different from regular tokens (such as bitcoin) because they are not fungible (i.e. one of a kind). The tokens can represent an image, a piece of music, video, or any digital content.

Suppose we take art as an example. Acquiring an NFT means we own the piece of art it's tracking. Only we possess it. It's one of a kind. We can sell it if we choose or collect more.

Can't they be copied?

No.

With cryptographic principles, you have a digital scarcity. While you can copy a digital photograph, you cannot duplicate NFT's. Remember, Blockchain is immutable.

When an NFT is sold, the original artists will get a cut of all future transactions. You can even display your purchased NFT's; there are companies producing frames for them. The use-cases are growing daily.

What's the point?

Our lives are moving from offline to online. With the amount of time we spend online and connected, doesn't it make sense that goods would move online?

Remember physical books? Now we have Kindles.

Remember cassette tapes? Now we have Spotify.

Art and collectables are now following suit in the form of NFT's.


Who am I? Someone who knows nothing about Blockchain. These were notes from Katie Haun on the Tim Ferriss Podcast.

“Katie Haun (@katie_haun) is a general partner at Andreessen Horowitz. Previously, she spent a decade as a federal prosecutor with the US Department of Justice where she focused on fraud, cyber, and corporate crime alongside agencies including the SEC, FBI, and Treasury. She created the government's first cryptocurrency task force and led investigations into the Mt. Gox hack and the corrupt agents on the Silk Road task force.”

Assume any mistakes are my own. Reach me on @MatthewVere if I should change something.

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