What Is A Non Fungible Token?

Non Fungible Tokens are one of the most dynamic, interesting, and powerful new technologies on the horizon.

But "fungibility" is so wrapped in jargon that it can be tough to appreciate why it is so important.


To put it in plain terms: something is fungible if you didn't care which one you got as long as you have one.


Are you standing in line at the grocery store and want one of those Hershey bars? Just grab one. They're all the same.

Want to play a round of Galaga at a retro gaming bar? Use the quarter you picked up from the sidewalk before coming in. Or, use one from the center console of your car. The machine doesn't care which quarter you use as long as you use one.

Something is fungible if it can be easily swapped out for another one like it.

Makes sense, right?

It's something you already understand.

In fact, fungibility is also so blatantly obvious to most people that it feels confusing why we need to explain it in the first place.

But stick with me.

Non Fungible Tokens

Quarters and candy bars are fungible. You, however, are inherently non fungible.

You are the only you.

Even if you have an identical twin you are still the only you with your exact experiences, hopes, and ideas.

Easy to appreciate.

Now try this on:

When you were a kid your Grandpa gives you a silver dollar for your birthday.

It's special. It's a treasure. You keep it in your pocket every day for decades. Every time you feel it, you feel comforted by its familiarity and a little sad for the family you no longer have.

This silver dollar is not like the others. This one is special.

Here is an important point: it is only special to you.

Physically speaking it looks like just any other coin.

Physically speaking it is just any other coin.

Don't think so? Take it to an arcade and it spends just fine.


The difference between how a machine sees the coin and how you see the coin is called semantics. Meaning.

It is not a difference of substance. You and the machine both understand it is a coin.

It is a difference of meaning.

That coin means 4 more games of Galaga to an arcade. To you it means years of fond memories.

Ok.

What does all this have to do with crypto & blockchain?

Copy To Infinity And Beyond!

You're standing in line at the grocery store, you're bored, so you pull out your phone to check Twitter.

You see a funny meme, and you save the image to your phone. You pop over to Facebook to share it and three hours later your Mom completely ignores the funny image and tells you to call some lady you met once 15 years ago.

Question: did you steal the meme from the original poster?

I'm not asking if they came up with the meme or not. I'm talking about the digital photo.

Did you steal that file from the original poster?

Maybe not.

Theft is usually taking what someone has, and leaving them without it.

In the digital world that doesn't really happen.

You can save the photo to your phone 10,000 times and it's still there with the original poster. If you want to explore this idea a little further, you can check out another article of mine that explains digital scarcity.

The point here is that the digital world is one where you can copy/paste to infinity and nothing is truly limited.

Until Bitcoin.

Bitcoin is a really cool project that uses techno-math-wizardry to create a digital entity (like that photo) that is genuinely & provably scarce.

Again, check out that other article to appreciate why this is important.

While Bitcoin solved the scarcity issue, each Bitcoin (or sliver of Bitcoin) is fungible. You could swap it with any other, and you wouldn't care.

Building on the innovation of provably scarce digital assets, Ethereum comes along.

It does the whole "fungible" trick pretty well with its own asset called "Eth" for short. I don't care what ether I have; just as long as I have some I'm happy.

But it does a lot more than that.

You can create new types of assets on the Ethereum blockchain. It starts with some Eth and then you add the semantic data to it. In our earlier example this is the emotional content and family details about what the coin means to you.

With Eth that data can be anything. A photo, an audio file, blueprints, or whatever.

This process of adding unique details and information to the blockchain is what creates the Non Fungible Token.

How it works is a whole system of "smart contracts" and that's a whole other conversation beyond the scope here.

And now we stick the landing: From this fungible baseline, Ethereum, you can create some "thing" (the Token) that is provably unique (Non Fungible).

Try It Out

Hopefully that gives you a better understanding of what people are talking about when they say "Non Fungible Token" or "NFT."

If you'd like to see all the different shapes and functionality they can take, head over to OpenSea.io which is the world's largest Ethereum-based marketplace where people can buy, sell, and trade NFTs from hundreds (if not thousands) of different projects. Each with their own vibe and nature.

For myself, I sell cryptoprints on two platforms (MakersPlace & KnownOrigin) and each print is a NFT created on the Ethereum blockchain, and once I make it, there can never be another like it.

There are some other exciting projects out there, and now I hope you can appreciate just how awesome they truly are!

Written & posted by Jonathan on August 7, 2020.
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Jonathan Pritchard started his professional journey at age 13 when he got paid $200 to do magic tricks at a company's employee summer picnic. From there he has traveled the world as a corporate speaker, entertainer, and trainer. Jonathan is the author of several books focused on mindset & motivation. You can find him living in Chicago practicing Wing Chun kung fu.
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