The world of digital banking and fintech is full of abbreviations and acronyms. In a bid to demystify some common terms, we explain ‘non-fungible tokens’ and ‘exchange traded funds’ – and how the two can be combined.
Non-fungible tokens (NFTs)
Non fungible tokens represent unique digital assets. NFTs protect digital assets by creating a unique digital signature to define the ownership of the asset, and which can then be traded.
The term ‘non fungible’ means the assets are not interchangeable. Fungible tokens on the other hand, behave more like money. A ‘token’ is code on a blockchain, which means the data can’t just be copied.
Each NFT contains information about ownership. It’s impossible to forge this so NFTs protect the copyright of digital assets, such as art and music.
The way it works is through a digital ledger, which prevents data files being copied as well as demonstrating ownership. By storing a unit of data on the blockchain, you can own the unique rights to use that particular assortment of dots.
Helen Thomas, Founder of BlondeMoney, recently wrote in Financial World, “Non-fungible tokens have come to be known for representing art, but they can apply to anything digital, such as music, or a video, or a blog post.
“The founder of Twitter sold his first ever tweet as an NFT for almost $3m. This feels strange because, at least for the time being, you can view this tweet any time you like. But that’s not the same as owning it on the blockchain. Looking at the tweet is a bit like buying a poster of the Mona Lisa from the gift shop.”