An NFT, or non-fungible token, is a type of digital asset that represents ownership of a unique item or piece of content, such as a digital artwork or collectable. Unlike fungible tokens, like cryptocurrencies, which are interchangeable and have a set value, NFTs are one-of-a-kind and cannot be replicated or replaced. They are typically stored on a blockchain, which provides a tamper-proof record of ownership and provenance.
How do NFTs work?
NFTs use blockchain technology to create a unique digital token that represents ownership of a digital asset, such as a piece of artwork, video, or other digital collectables. The token is stored on a blockchain, a decentralized and tamper-proof digital ledger that records all transactions made on the network.
When an NFT is created, a unique digital signature, called a hash, is generated for the digital asset, and this hash is stored on the blockchain. This hash serves as the NFT's "fingerprint" and makes it possible to verify the authenticity and ownership of the NFT.
When someone wants to buy an NFT, they can use a cryptocurrency, such as Ethereum, to make a payment to the NFT's owner. The transaction is recorded on the blockchain, and the new owner's digital wallet address is added to the record of the NFT's ownership.
The NFT can then be traded or sold on the open market, and the ownership and transaction history of the NFT can be tracked on the blockchain. As the NFT is unique and one-of-a-kind, its ownership is also unique, which makes it valuable and hard to replicate.
What and when was the first NFT?
The first NFT, or non-fungible token, to be created and traded was CryptoPunks. It was created in June 2017 by a programmer named Matt Hall and his partner John Watkinson. CryptoPunks are 10,000 unique 24x24 pixel art characters, each one with its own distinct features and attributes. These characters were generated by an algorithm and were stored on the Ethereum blockchain as NFTs. They were available for free, and anyone could claim one. This was one of the first use cases of NFTs and it helped pave the way for the development of the NFT market as we know it today.