WHAT IS A NON-FUNGIBLE TOKEN (NFT) AND WHY YOU SHOULD CARE

5 min readMar 25, 2021

The Beginner’s Guide to the Non-Fungible Token

FUNGIBILITY

I have a background in accounting, and it was my stated minor in my college years, but I found the topic necessary, but necessarily boring. I actually dropped out of college after roughly two years, because I found it unnecessary and necessarily boring, but that’s another topic for another day. In any case, the term “fungibility” is a term that accountants apply to an asset or good that is of the same type as another and can be exchanged equally with it. As a basic example, two gold bars of the same shape, size, quality, and weight would be considered “fungible.” In theory, “fungibility” makes the assets easier to exchange and quantify.

NON-FUNGIBLE ASSETS

Non-fungible assets would therefore be things that are unique, with no identical asset in existence. This would make the non-fungible asset more difficult to trade, as it’s value isn’t established readily by the market. With the case of non-fungible assets, they are worth whatever someone is willing to pay for them at any given time and are difficult to quantify and more difficult to trade. An example of a non-fungible asset would be a cut diamond that is both rare and unique, or an honest politician. Both are equally unique and rare.

TOKENS

Many of us would recognize tokens as round pieces of metal that are used instead of money for specific purposes. For instance, back in the early days when fossils roamed the earth, I would exchange cash for tokens, and then use the tokens to insert in video gaming machines to play video games. But tokens can really be anything that represents, or appears in function like, the original. For instance, I could have the token photo or image of my wife, or my “token wife,” and, while it is beautiful and unique, it is not as wonderful and unique as the original. In most cases, tokens are just a representation of the original.

NON-FUNGIBLE TOKEN

So it would follow that a non-fungible token would be a unique, noncomparable, representation of the original non-fungible asset. While duplicates or copies of the original may appear similar, the non-fungible token would be a representation of that which is unique. In most cases, when people refer to non-fungible tokens, or NFTs, in today’s world, they are referring to digital representations, or tokens, of artwork or music, but this unique token can really be a representation of anything that is unique. In the computer world, NFTs are created using blockchain technologies that guarantee that they are unique.

ESTABLISHING VALUE

Beauty is in the eye of the beholder, which means that different people establish value for things differently. So establishing value for unique things is difficult, yet negotiable. For instance, I am very unique, I suppose, and unlike any other. But, for some, that just means I’m a large or annoying presence, but my family, friends, sons, and spouse might establish a higher value for me, or at least that is the hope. This value would be established when they say that they would not trade me for “anything in the world,” and I suppose this would include some digital NFT of me.

WHY ARE NFTS POPULAR NOW?

So, why are NFTs all the rage now, and why are wealthy people buying them now? I do not know for sure, but I suspect it is because the fungible assets like money are too easy to create and lose value. We tend to think of money as unique, because it usually has a unique serial number printed on it, but the law makers have passed laws making it easy to create it out of thin air. So, the fungible asset like cash or printed or hard money can easily be devalued when the electronic duplication of it is so easily accomplished. While we all sleep at night, the government produces more debt out of thin air which is represented by the fungible asset called money. So, it is my feeling, people are looking for non-fungible assets or tokens to invest in to maintain some form of valued thing.

YOU ARE NON-FUNGIBLE

You are a non-fungible person, unique in this world, and you are surrounded by other non-fungible people and creatures every day. While many of you may appear similar in nature due to genetics, you still remain unique to your very core. And, with this uniqueness comes a beauty that we could have never imagined, duplicated, or created. Each of you has established value, and it is priceless.

ME

I’m not sure that I’ll ever get into purchasing or buying non-fungible assets or tokens, as I tend to enjoy observing unique beauty in others rather than needing to possess it. But, I hope that I’ve given you some insight into understanding the terminology surrounding NFTs. Feel free to follow my ramblings at the links listed below: