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What are NFTs?

OK, I know NFT stands for nonfungible token. But what does it actually mean? Let’s start with the words themselves. In economics, “fungible” is a term used for things that can be exchanged for other things of exactly the same kind. The U.S. dollar is fungible, because you and a friend can trade $1 bills, and each of you will still have the exact same spending power. Most cryptocurrencies are fungible, too — a Bitcoin is a Bitcoin, and it doesn’t really matter which Bitcoin you have. But most objects in the physical world, such as cars and houses, are nonfungible — meaning they have unique qualities, and you can’t just exchange them for others of the same type. (You might be willing to swap your 2020 Honda Civic for another 2020 Honda Civic, but the cars wouldn’t be exactly the same, and you’d want to know what condition the other car was in before you’d agree to the trade.) Tokens, in crypto speak, are units of value stored on a blockchain. Cryptocurrencies like Bitcoin, Ether and Dogecoin are tokens, but not all tokens are meant to be used as money. Tokens can be attached to tangible goods — Nike, for example, is experimenting with crypto tokens that are linked to the ownership of physical shoes — but they can also represent intangible goods, like access to a private chat room or storage space on a cloud server.

  • This is part of “The Latecomer’s Guide to Crypto,” a mega-F.A.Q. about cryptocurrency and its offshoots. Kevin Roose, a Times technology columnist, is answering some of the most frequently asked questions he gets about DAOs, DeFi, web3 and other crypto concepts.”

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