NFT Explained: What The New Crypto Craze Is, And What It Can Be Soon

The landscape of digital art is being upended by NFTs, or non-fungible tokens, to the point where it's difficult not to have heard the term in passing. But what is an NFT? Why are people spending millions of dollars on JPEGs? And could it change how microtransactions in games work?

Just what is a Non-Fungible Token?

First and foremost, NFTs are intrinsically tied to the blockchain--an online ledger that is maintained by thousands of users globally through the process called mining. Transactions on the blockchain aren't centralized, so it's difficult (but not impossible) to edit the ledger to make fraudulent transactions. This is the same technology that powers cryptocurrencies like Bitcoin ($BTC), Dogecoin ($DOGE), and Ethereum ($ETH) around the world. NFTs exist on various blockchains, but most being sold are found on the Ethereum blockchain. Unlike the currency, however, they're non-fungible. That means that one NFT is entirely unique from the rest, unlike the fungible Ethereum, where one coin is identical to all others, thus allowing it to be used as a currency. NFTs, then, are one-of-a-kind in a way, which can explain why they're being used to verify purchases of digital goods. The goods themselves are specifically unique to the token (an image sold as an NFT can still find its way online for anyone to see) but the token itself is an indicator of the purchase.

So what does an NFT actually give me?

This is where things get a little strange. For example, an artist can choose to mint a piece of digital artwork with an NFT and then sell the token through multiple auction houses. The token itself does not determine who can view the artwork, but rather who holds the rights to it. There's some grey area here, where the artist can still govern overall ownership and distribution rights, but for the most part, the owner of the NFT is technically the owner of the artwork, even if the image is hosted on Google and available for anyone to right-click and save.

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