NFTs for "dummies"

The title and content of this post was inspired to me by this comment of @riverflows:

on the recent post of @ beggars:
https://steempeak.com/steem-engine/@beggars/it-s-time-to-start-buying-eng-nft-s-on-steem-engine-are-coming

So, I decided to give it a shot at explaining NFTs -- the easy way.

The long name, non-fungible token, won't tell you anything, unless you know what fungible means.

Let's see what fungible means.

So, by this definition, something is fungible if you can replace it with an identical item.

Let's try some examples: 1 ounce of gold is fungible with another once of gold of the same purity.

Here's possibly an example few would think of to illustrate fungibility. If you want to water your flowers, 1 liter of water taken from kitchen water tap is the same as one liter of water taken from the bathroom and the same as 1 liter of water taken from the water tap in the yard. It doesn't matter where you take the water from. If you put the 3 liters in 3 separate sprinklers, it doesn't mater which one you choose, they are interchangeable.

This is a classic example: $10 is fungible with any other $10 banknote, meaning if I give you $10 and you give me back a different $10 banknote, nothing changes (provided both are real and still usable).

Now, let's get closer to the crypto land. 1 STEEM on my account = 1 STEEM on your account. We can exchange them if we want, nothing changes (except the transactions are recorded, so anyone curious will know at some point we ping-ponged 1 STEEM).

Now let's switch the coin to its reverse: the non-fungible case.

By flipping the above definition, "non-fungible" means "NOT replaceable by another identical item".

Actually the word "identical" is in our way there. Let's see what we get if we don't use it: "NOT replaceable by another item".

How else can you say that, in one word? That's right: UNIQUE!

So, non-fungible tokens means UNIQUE tokens. To be unique, a NFT will include a series of properties which a fungible token doesn't have. And those properties will allow to uniquely identify a token in a class of similar tokens.

Let's say we define a class of NFTs for Splinterlands. In that class of NFTs, you can't interchange two common Sea Monster cards having the same BCX, because each is unique.

Why would one want his Sea Monster as a NFT instead of the way it is now? Well, for once, because then you'd be able to list it for sale on an exchange like the Steem-Engine (or to buy it from there). But it's not the only place where NFTs are traded, and I'm sure all successful NFTs will end up listed on alternative markets as well. The market for NFTs becomes larger.

Then, being a NFT, more games can have access to the same cards, and each can have its own gameplay.

NFTs are mainly used right now for games and game-related options, like skins.

But the possibilities of using NFTs aren't reduced to gaming.

They haven't been explored yet fully.

One of the usual examples is tokenizing art. To be able to uniquely identify an artwork from another, you can use non-fungible tokens.

The very interesting concept about tokenizing art is fractional ownership. Can you imagine owning 5% of a painting? I don't believe it's possible in today's world (maybe I'm wrong).

But with NFTs, just like you can own 100 satoshis -- a fraction of a bitcoin --, you would be able to own a fraction of an artwork. When the artwork changes ownership, you would receive your share of the purchase price.

That can be extended to other types of ownership, like real-estate.

One other use case I'd rather see implemented sooner than other alternatives, is to use NFTs for software licenses. You buy a NFT, you buy a software license. Tradable afterwards, so you can actually sell a license for the remaining time it has left, if you don't use the product anymore.

Of course, since the concept is rather new, we're just scratching the surface for the possibilities.