To begin, let's describe what a non-fungible token (NFT) is — we start with “fungibility.” Fungibility is the ability of an asset to be exchanged with another, similar, asset without compromising its value. The fungibility of an asset defines the characteristics of the asset, i.e. divisibility and value.

In the world of currency, an "ABC" dollar carries the same value as another "ABC" dollar. The first "ABC" and the second "ABC" have different serials but has the same value. Nevertheless, everything changes when we change our focus to Non-Fungible Tokens (NFTs) — a non-fungible token comes with a distinct value from another equal or similar NFT. An individual NFT has unique characteristics that dictate its peculiarity; hence the name “non-fungibles”. They are much similar to rare and precious stones, works of art, and luxury things in general. In conclusion, going back to the "ABC" dollar example, "non-fungibles" meant that the first "ABC" and the second "ABC" might have the same nominal value, but due to the unique serials, their real value might be different.

(Image: TerraBots NFT)

NFTs have common characteristics like rareness, indivisible, and uniqueness:

  • Rareness: their value is much attributed to their scarcity. Although the developers of NFTs can develop any amount of these tokens, they usually have a set limit per project. In this case with TerraBots, the limit is 10101.
  • Uniqueness: perhaps the most valuable feature of NFTs so far. NFTs come with a permanent information tab marking their uniqueness. This can be thought of as their certificate of authenticity. Usually they have different attributes such as outfits and headgears. In our example of TerraBots, the developers are trying to bring more utility to NFTs by making physical versions of the NFT as toys, and giving the holders the ability to use their 3D NFTs as their avatars in the metaverse.
  • Indivisible: NFTs cannot be divided into smaller units. You are only allowed to buy the whole amount of digital art.

Following Facebook’s announcement about the name and company vision change to Meta, it seems the trend may follow for other companies to go to the metaverse and the NFT market will grow to support it.

Alternatively, check out this video from TerraBots for an example of how NFTs can be used in the metaverse.

Hopefully, this article explains how this new technology can be utilised in a different way. (FS)