What is a Non-Fungible Token?

Crypto Kitty

I want to do a larger post on cryptocurrency and blockchain technology itself, but today I want to talk about non-fungible tokens (NFT), and how they relate to it all.

Non-fungible?

Good question. fungibility is a property of a good or commodity whereby each unit is interchangeable due to the fact that each unit is generally indistinguishable, and/or shares the same set of properties. The units must be substantially equivalent for fungibility to exist.1 Money, for instance, is a fungible commodity as their is a system of interchangeable units (dollar bills and coins). If a unit of something is non-fungible, it can’t be interchanged based on its equivalence as each unit is distinguishable from another unit.2 Units can still be traded, but without any equivalence.

So what’s a non-fungible token?

A non-fungible token, simply put, is a token that is generated in blockchain. The token is unique due to how hashing algorithms work, and can often be represented as as an item, object or character.

For example, cryptokitties.co, which represents itself as a crypto-collectable as opposed to bitcoin. Crypto-collectables are a type of non-fungible token. In the example of cryptokitties, each token generates a random kitty collectable. These collectables can be breed, traded, sold and bought on the marketplace. You can even link your kitties to other projects in the “kittyverse” such as KotoWars, a card battle game where you use your own cryptokitties; catatonic.club, an autonomous kitty breeding tool; or view your kitties details over at Kittyhelper.co.

How are they related to bitcoin?

Both bitcoin and non-fungible tokens are built off of the same technology, blockchain. Where as bitcoin uses blockchain as a digital ledger for currency, non-fungible tokens use blockchain for validation of trades, creations, and sometimes even death.

Why would I want one?

Although they don’t necessarily have an interchangeable value, they still contain value. Each non-fungible token represents the value of whatever crypto currency is used as the underlying market driver.

How do I get one?

Start out by finding a crypto-collectible that you’ll enjoy collecting.

Other then cryptokitties.co, there you might want to check out HyperDragons, MLB Crypto Baseball, Blockchain Cuties, Known Origin and MegaCryptoPolls just to name a few. If you have an interest, there is likely a crypto-collectible that exists to cover you.

References

1 https://en.wikipedia.org/wiki/Fungibility
2 https://en.wikipedia.org/wiki/Non-fungible_token