NFT is an abbreviation for Non-Fungible Token. NFT is a digital product, created with blockchain technology, that represents both tangible and intangible items.

The Characteristics of NFTs

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

(1). Blockchain Representation

An item is first designed as a digital object, which is then passed through a blockchain to become an NFT.

Thus, NFTs are not just digital pictures but are items that have passed through a blockchain. This means that NFTs are blockchain representations of both tangible and intangible items!

(2). Uniqueness

Physical money and other cryptocurrencies are “fungible,” meaning they can be traded or exchanged for one another. They are also equal in value – one dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin.

Crypto’s fungibility makes it a trusted means of conducting transactions on the blockchain.

NFTs are different. Each NFT has a digital signature that makes it impossible for NFTs to be exchanged for or be equal. This character is referred to as non-fungibility.

Thus, despite that two or more NFTs may look alike, still you cannot just exchange one of these NFTs with another just as you can easily exchange one dollar with another dollar or one Bitcoin with another Bitcoin.

This is because each NFT is unique with its own unique metadata.

(3). Non-Divisibility

Basically, an NFT cannot be divided into smaller pieces like other cryptocurrencies. For example, one Bitcoin (BTC) can 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 crypto by market capitalization, can be divided into 18 decimal places (the smallest unit 1 wei = 10-18 ETH).

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

However, this is not the case with NFTs. Each NFT is a completely non-divisible asset.

Nevertheless, several people can come together and pay for a certain NFT. This is referred to as Ownership Fractionalisation.

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