To understand what an NFT is, consider the three main characteristics of an NFT:

(1). Programmability

NFTs are created and minted using blockchain technology. The creation and minting processes allow the NFT creator to program specific characteristics into the NFT.

Programmability in NFTs refers to the ability to embed rules and automated functions within an NFT using smart contracts. This means creators can design NFTs to perform specific actions beyond simple ownership transfer.

For example, the following features can be programmed into an NFT:

(a). Perpetual Royalty

This feature will allow the NFT creator to keep receiving an automatic percentage of interest whenever the NFT is resold.

(b). Access control

This programmed feature will allow the NFT owner to have specific privileges, such as access to exclusive content, memberships, or experiences.

(c). Gamification

NFTs can be programmed for gaming purposes, hence, interact with other tokens in blockchain games.

(d). Conditional Transfers

An NFT can be programmed to be sold or transferred only under certain conditions, and such specific conditions will be written as code into the fabric (metadata) of the NFT to give the NFT a specific character.

Such programmability is commonly seen in Asset Tokenization, which relies mostly on NFT technology.

In short, programmability makes NFTs dynamic, functional, and customizable, rather than just static digital certificates. This opens a whole new world of reality in both asset ownership and financial possibilities.

(2). Non-Equal Divisibility

An NFT cannot be divided equally into smaller pieces like fiat currencies or other fungible cryptocurrencies.

For example, one Bitcoin (BTC) can easily be divided into 8 decimal places (0.00000001 BTC). The smallest unit of Bitcoin is called a satoshi; thus, 1 satoshi = 0.00000001 BTC.

Likewise, Ethereum (ETH), the second largest cryptocurrency by market capitalization, can be divided into 18 decimal places (the smallest unit 1 wei = 10-18 ETH).

Eda Coin (abbreviated EDA), the native cryptocurrency of EdaFace Ecosystem, can be divided into 18 decimal places.

However, this is not the case with NFTs. Each NFT cannot be divided into smaller equal units. For example, you cannot divide an ape NFT into equal, smaller units. If you do, one part may have the ape head, the other ape legs, ape hands, etc., which differ from each other.

An ape hand alone cannot be sold separately because it does not represent the original whole ape NFT, nor can an ape hand be exchanged with another ape hand, since each hand cannot equally represent the other, and certainly does not represent the original whole ape NFT.

This non-equal divisibility implies that instead of trying in vain to divide an NFT and sell the divided parts separately, several people can come together and pay for a certain NFT. This is referred to as Ownership Fractionalisation or Fractional Ownership.

In other words, an NFT can have joint ownership, and any profits realized from trading such an NFT are shared among the joint owners in proportion to the size of their ownership rights.

(3). Non-Convertibility

As mentioned above, Bitcoin, Ethereum, EDA, etc., are cryptocurrencies that can be divided into equal units.

The interesting thing about this equal divisibility character is that each divisible unit is equal in value to a similar divisible unit.

For example, 0.2 Bitcoin in Phoster’s wallet is equal to another 0.2 Bitcoin in Sophia’s wallet. Similarly, 100 EDA in Charis’ wallet is equal to 100 EDA in James’ wallet.

The same is true for fiat currencies. For example, 500 US Dollars in Jephtha’s bank account is equal to 500 US Dollars in Eunice’s account.

In other words, Bitcoin, EDA, and the US Dollars are said to have an Equal Intrachange Unit Value. What this means is that you can easily exchange 100 EDA in one wallet for another 100 EDA in another wallet.

This is the Intra-Value Convertibility character of a currency, which is made possible by the Equal Intrachange Unit Value.

In simple terms, it means Bitcoin, Ethereum, EDA, and USD each have equal divisibility and intra-convertibility characteristics.

These equal divisibility and convertibility characteristics are collectively referred to as Fungibility. Thus, Bitcoin, Ethereum, EDA, and USD are fungible currencies.

On the other hand, NFTs do not have Equal Intrachange Unit Value, hence, they do not have Intra-Value Convertibility characteristic.

Thus, an ape NFT cannot be divided into four equal parts just like Bitcoin. If you do, one part may have the ape head, the other ape legs, ape hands, etc. The ape head cannot be converted or interchanged with an ape leg.

Therefore, the non-fungibility of tokens is that they are neither equally divisible nor convertible. In other words, the combination of non-equal divisibility and non-convertibility properties is what is referred to as Non-Fungibility, and tokens with these properties are known as Non-Fungible Tokens (abbreviated NFTs).

These non-equal divisibility and non-convertibility properties give added identification and financial value to NFTs.