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This project had partial backing from the future co-founder of Ethereum, Vitalik Buterin, and was the first incarnation of non-fungible tokens, as we know them today.Ĭolored Coins planned to issue real-world assets, such as real estate, on top of the Bitcoin blockchain. The story of “nifties,” as some choose to call NFTs begins in December 2012 with the uneventful release of Colored Coins. Also, they are indivisible, which means that you cannot sell parts of them like you would sell satoshis out of bitcoins. They are distinguishable by nature, value, and ownership history. Instead, they have all the characteristics of digital collectible items. NFTs are not aiming to become currencies. Therefore, they become interchangeable to function as mediums of exchange. This way, an NFT is proof of authenticity and ownership in the digital world.Īll currencies, both fiat, and digital must be fungible. You cannot exchange an NFT for another NFT, hence their non-fungible nature. Each unit has a unique characteristic that conveys a unique value as well. You can always exchange your bitcoin for another bitcoin without losing or gaining anything in the process.

When you have 1BTC, you own one unit of cryptocurrency equal in value and nature to all the other nearly 18.8 million bitcoins in circulation. For instance, Bi tcoin is a fungible token. The best way to understand non-fungible tokens is to look at fungible assets. It is available only on a blockchain and can represent either a digital asset or a real-world good. A non-fungible token (NFT) is the unique tokenized version of an asset.