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What are non-fungible tokens (NFTs)?
What are non-fungible tokens (NFTs)?
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Written by Avalanche
Updated over a week ago

Non-Fungible Tokens (NFTs) represent a fundamental shift in digital ownership and authenticity. Their core attribute is uniqueness; each NFT is distinct and cannot be exchanged on a one-to-one basis like cryptocurrencies such as Bitcoin or Ethereum. This uniqueness of NFTs mirrors the singularity of physical assets, with each token having its individual characteristics and value.

NFTs work by tokenizing digital, and potentially physical, assets. This process involves converting an asset into a digital token, which can then be transferred, sold, or stored on a blockchain. This tokenization is not just about creating a digital representation; it’s about developing the digital asset with the properties of ownership and uniqueness that pertains to a 1-to-1 value ratio.

NFTs play a crucial role in how digital ownership is defined. They provide a blockchain-backed proof of ownership and a detailed history of the item's previous ownership through what we know as smart contracts or provenance. This aspect is particularly vital in areas like art and collectibles, where authenticity is key.

Unlike cryptocurrencies, which are divisible, NFTs are indivisible. This means that you cannot own a fraction of an NFT, unlike owning a portion of a cryptocurrency like Bitcoin.

Building NFTs on Avalanche

Minting an NFT on Avalanche starts with the creation of a digital asset, such as artwork or music. This asset is then tokenized, turning it into an NFT by uploading it to the Avalanche blockchain. Briefly put, during this process, unique metadata is added to define the NFT's properties.

NFTs have opened new opportunities for artists and musicians, offering them a platform to directly sell their works globally. Digital collectibles, including game items, digital cards, or limited-edition releases, have found a new expression through NFTs.

In the gaming world, NFTs have revolutionized the ownership of in-game assets. There's growing potential for NFTs to be interoperable across different gaming platforms, particularly within ecosystems like Avalanche. Learn more about Avalanche gaming here.

Looking beyond the digital sphere, there's potential for tokenizing physical assets like real estate or art. This approach could revolutionize the trading of high-value items, making transactions more accessible and traceable.

For any additional questions, please view our other knowledge base articles or contact a support team member via the chat button. Examples are for illustrative purposes only.

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