What Exactly Are NFTs? - Fungible Vs Non-Fungible Tokens

What Exactly Are NFTs? - Fungible Vs Non-Fungible Tokens

Despite the surging popularity and increasing notoriety of NFTs, there are still many people wondering, what exactly are NFTs? And what’s the difference between fungible and non-fungible tokens?

Although the first NFT was minted in 2014, the brief history of NFTs was rather quiet until 2021 exploded into them becoming at the forefront of everyone’s mind, especially in the art industry and market. In fact, in 2021, collectors and traders spent over $20 billion on NFTs, a  very sharp increase from the $100 million spent in 2020.

But on the whole, we still need to know more about what they are, how they work and what they can be used for, so that’s what we’ll be looking at in this article.

What Are NFTs?

NFTs (non-fungible tokens) can represent ownership in almost anything, from digital art to virtual real estate.

It has often proved hard to demonstrate rights in the digital asset space, but with the introduction of NFTs, demonstrating ownership has been safer and easier.

Contrary to bitcoin or dollars, NFTs are described as Non-Fungible because each one is unique and has its own value.

NFTs hold unique data that is stored on a digital ledger that establishes a transparent proof of ownership on the blockchain network. This enables anyone at any time to trace who owns a particular digital asset.

Fungible Vs. Non-Fungible

The Cambridge dictionary defines fungible as “something such as a currency, share, or goods, that can easily be exchanged for others of the same value and type”.

Examples of fungible assets include traditional currency (which has the same value whether it’s in bills, change, or wire transfer), precious metals, food, or cryptocurrency.

Something that is non-fungible is unique, irreplaceable and non-transferable.

A non-fungible asset holds specific and precise data that cannot be replicated or replaced with something else.

As an example, if you trade one gold bar for another gold bar, you’ll have exactly the same thing as you started with. But if you traded something non-fungible, such as a one-of-a-kind collector’s card for another, you’d have something entirely different.

How Do NFTs Work?

Most NFTs are part of the Ethereum blockchain. Ethereum itself is a cryptocurrency similar to Bitcoin, but its blockchain is also used to support NFTs. The NFTs contain extra ‘token’ information that makes them different from an ETH coin because they’re unique and non-fungible. 

Other blockchains can, and in some cases have implemented their own versions of NFTs because they’re generally encoded using the same underlying software or blockchain technology as the cryptocurrencies.

NFTs enable a person to assign or claim ownership of any unique piece of digital data which becomes trackable by using the Ethereum blockchain as a public ledger. Each and every individual token is completely unique and is not divisible.

An NFT can only have a single owner at any given time and that ownership is managed using Unique Identity (UID) and metadata that no other token can replicate, creating digital scarcity.

The NFTs themselves are minted through smart contracts that assign ownership and manage the transferability of the NFTs. Each time an NFT is minted or transferred, a code is executed and stored in smart contracts; the information is then added to the blockchain where the NFT is being managed.

What Can NFTs Be Used For?

NFTs are minted from digital assets but can be used to represent either digital or physical assets. For example, an NFT could represent:

  • Digital assets

- Digital art

- GIFs

- Videogame items

- Collectables 

  • Physical assets

- Event tickets

- Legal documents

- Real estate

For galleries, collectors and investors, NFTs are the perfect means of establishing ownership and ensuring the authenticity of an asset, which is especially important in the art market.

For artists, NFTs offer a new opportunity to monetise their work, including the potential for programming in royalties to receive a percentage from future sales of the artwork too.

Ultimately, the main purpose for NFTs and what can be expected to be a huge part of their future is the power authentication and establishing ownership.

Could Someone Just Copy/Paste Your NFTs?

Something that those against NFTs often bring up is that anyone has the ability to simply run a Google search of your image and then save it, or copy and paste it, with the impression that they then have the artwork for free.

The question is, does saving an image of Van Gogh’s Sunflowers give you the status and pride of ownership that comes with genuinely owning the artwork?

Of course not.

Ultimately, only true ownership of the artwork has any value and by being able to establish that ownership, verify it and authenticate it is where the value is.

What's Next?

By this point, you should feel a little more informed about what NFTs are and the differences between fungible and non-fungible tokens. Having an idea of how NFTs work and some of their uses is also helpful, especially if you’re looking to get involved in buying, selling, or collecting NFTs and NFT art in particular.

One of the most exciting things about NFTs is the limitless potential for their uses in the future which will be particularly prevalent in the art world, as we’ve already seen with the growing trend in recent years.

Looking To Learn More About NFTs & NFT Art?

Zeno Fine Art is a pioneering art publishing house, connecting galleries to artists and providing a quality worth collecting.

If you’re an art gallery, business or collector looking to learn more about NFTs as well as discover Zeno Fine Art’s exclusive NFT collection:

Feel free to contact our expert advisors or sign up for a trade account with us.

Our trade clients benefit directly from access to all of our stock at a fixed, discounted wholesale price with exclusive notifications and a dedicated, bespoke service providing support and guidance with selecting and curating the perfect collection to fit your gallery’s style and needs. 

Learn more about NFTs at Zeno Fine Art.


Featured Artwork: Miss Aniela - The Enchanted Hotel