What is an NFT? We know it translates to ‘non-fungible token’, but what does that mean for your business? The first thing to understand is; what’s the difference between fungible and non-fungible?
When we talk about fungibility, we’re talking about the interchangeability of a good or asset. In other words, fungible assets are those that can be replaced by other similar ones. For example, if you have a $20 bill in your wallet, you could swap it out for another $20 bill and still have the same value. That’s fungible.
A few other examples of fungible assets include airplane frequent flyer miles, coffee rewards, general admission concert tickets, oil, and wheat. It doesn’t matter if a fungible item is physical or electronic, as long as identical items could be substituted for each other.
Non-fungible refers to unique items that cannot be substituted. For instance, the real estate title to your house would be considered non-fungible. The title to your house is just your house. It would be impossible to swap the title with your house with another identical version, because all other real estate titles have a unique combination of owner, address, plat number, and more. Even identical houses have unique titles based on ownership and location.
If you give somebody a concert ticket, it would be impossible to swap tickets for an identical copy with the same day, show, seat, time, and band. This is why real estate titles and concert tickets are both non-fungible, meaning it’s one of one, of a very limited set of something that you own. Non-fungible items can be physical or electronic, as long as they represent a unique item.
What is Tokenization of Assets?
Both non-fungible and fungible items can be tokenized and put on the blockchain. Whether this item is digital or physical does not matter. Physical items can be easily tokenized, which refers to simply the process of turning anything into a digital asset. Blockchain has limited capacities for data storage, so an asset tokenization is a better option, where NFT is serving as the digital key to unlock information about an item.
How to Tokenize an Asset?
Imagine that we are going to turn your healthcare record into an NFT. First of all, this asset would be non-fungible, as each person’s healthcare record is unique. Since blockchain has limited storage space, and non-fungible tokens are publicly viewable, the NFT would serve as the virtual key to unlock a secure, private filing cabinet holding all of your information. The information found within your health record can include MRIs, prescriptions, medical notes, surgical notes, and anything else that is a part of your medical history. Thanks to the security found within the NFT, your information would be encrypted and securely protected.
What NFTs Can Be Used For?
Using this same process, non-fungible tokens can be created for real estate records, tax records, and building permits. Each one can be put into a database that your NFT and only your NFT can unlock. Whenever you need access to these records for review, such as going to a different doctor or going to the county commission for zone variance, you can always unlock those records and get to them.
Non-fungible tokens can also be used to verify the authenticity for any item, because the blockchain stores every transfer of ownership of NFTs, and can be easily traced back to their origin or creator. And that way, whenever you need access to the records for review, you’re going to a different doctor, or you’re going to the county commission for a zoning variance, you can always unlock those records and get to them.
NFT categories can also include estate documents, wills, DMV records, real estate, healthcare, concerts, sports, event ticketing, arts, music, and more use cases yet to come. The world is just absolutely ripe for disruption and innovation, thanks to non-fungible tokens.
That’s what an NFT is. If you are curious about how NFTs may apply to your business, or how to get started, reach out to us on Twitter or contact us for more information.