According to en.shilian.com, NFT, also called Non-Fungible Token, is the unique crypto token representing digital assets, unlike Fungible Token like Bitcoin, NFT has the traits of indivisibility and non-fungible. Using NFT, we can identify the ownership of specified assets with specified value.

NFT can also be defined as follows: a digital asset that cannot be divided, reduplicated, replaced. NFT is non-fungible token, this may be a strategy word, if you talk about fungible token, you can regard Bitcoin as a representative of FT. FT can be copied, substituted or subdivided. For example, a bitcoin in your wallet is essentially the same to the coin in my wallet, and one bitcoin can be divided to 0.1 bitcoin, this is fungible token.

Let’s consider another case, dollar and other fiat currencies are exactly fungible. Supposed that you have $5, and your friend have $5 too, your $5 can be exchanged with your friend’s, there would be no changes or influences.

Another case of non-fungible is artwork, for example, there is only one original version of a picture. So, we’ve got a general idea about what NFT is, then what are the traits of NFT?

Traits of NFT

We can regard NFT as a ownership confirmation to a virtual asset and benefits that is (1) non-copyable (2) unchangeable (3) indivisible

1. Uniqueness, every NFT is equipped with different features which are always deposited in the meta data of the token.

2. Provable rarity, in general, only few of NFT have a copy, the token amounts can be verified on the blockchain, that’s the probability.

3. Indivisibility, most of NFT can not be divided, so we can not buy or sell a part of an NFT. 

Standards of NFT

The most popular standards of NFT are ERC-721 and ERC-1155. Although that NFT can be deployed on smart contract-supported blockchain, but the ERC-721 and ERC-1155 are the most high-profile standards.

ERC-20 is a famous standard built on Ethereum blockchain, stablecoins like USDT, DAI and DeFi token like LEND, YFI, SNX and UNI are adopting this standard.

ERC-1155 is the next step for creating non-fungible token, it allows contracts that support both NFT and FT. It is developed Enjin, a blockchain-based game project.

ERC-1155 standard allows developers to define FT and NFT, and define the token numbers.

NFT+DeFi

NFT can bring more opportunities leveraging decentralized finance. For now, collateral is needed in most of DeFi lending protocol. The most interesting idea is to stake NFT. Which means, we can stake NFT representing artworks, digital land and even tokenized house properties to lend other properties.

In addition to be used for collateral, NFT can also be used for issuance, bonds, futures and other complicated financial products

Conclusion

Now, we have known the definition and traits of NFT, we can know that NFT is a unique digital identifier recorded in a blockchain that cannot be copied, substituted, or subdivided. NFT has the core trait of non-fungibility, which is the biggest difference between FT represented by Bitcoin. We believe that the more information about it we know, we will have a better user experience in the NFT world.