An NFT, or non-fungible token, is a unique digital record stored on a blockchain that represents ownership of a specific item – often digital art, but also collectibles, in-game items, or other unique assets.
‘Non-fungible’ means each token is distinct and not interchangeable, unlike a fungible asset such as Bitcoin, where each unit is identical and can be swapped one-for-one with another.
Owning an NFT typically means owning a token that references a piece of content, not necessarily the copyright to that content – the distinction between owning the token and owning the underlying intellectual property is a common source of confusion.
NFT prices have historically been extremely volatile and speculative, with many collections losing most of their value after initial hype faded, similar to earlier speculative bubbles in other markets.
Whatever their future use cases turn out to be, it’s worth separating the underlying technology – a way to record unique digital ownership – from the speculative trading behavior that dominated NFT headlines during past hype cycles.