What are Non-Fungible Tokens (NFT's)?
A non-fungible token (NFT) is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable. NFTs can be used to represent items such as photos, videos, audio, and other types of digital files. Access to any copy of the original file, however, is not restricted to the buyer of the NFT. While copies of these digital items are available for anyone to obtain, NFTs are tracked on blockchains to provide the owner with a proof of ownership that is separate from copyright.
Still don’t get it?
Didn’t expect you too. Let’s break it down.
When you mint an NFT, a bit of code is created. That bit of code is your token. You can attached things to your token. Some simple examples are a picture, a video, or a song. You could also, in theory, attach the title to you new Lincoln Aviator to an NFT.
Why would you want to do that?
Well, it makes things awfully convenient when it is time to sell the car. If a blockchain existed that had every car built recorded on it, when it comes time to buy a car, you could simply just buy the token associated with that car, and your ownership is immediately established by virtue of the the token being in your wallet.
Any agencies requiring the information immediately knows you now own the car because it’s recorded on the blockchain and the wallet containing the NFT is linked to your identity. If you decide to sell the car later on, same thing. The transfer is recorded on the blockchain allowing everyone to immediately see who currently owns the car.
For art, the NFT is linked to file stored on a database. Artists can also have the option of choosing to add a royalty payment as part of the fee for subsequent sales.
For example: If beeple mints a token and lists it on the marketplace for 1 ETH with a royalty rate of 10%, On the first sale of the product, the marketplace fee (let's say 5%) will be deducted. The artist will net 0.95 ETH on that first sale. If the buyer then resells it for 2 ETH, the artist will receive 10%, netting 0.2 ETH. The creator will earn 10% of all subsequent sales of the tokens.