Articles like this traditionally start with a definition, plagiarized from some online dictionary. The first paragraph just verbatim repeats the definition and then tries to expand on it for another couple of paragraphs. Your reading efforts are also usually interrupted by a popup asking you to disable your villainous ad-blocker and once completed you are still left with the same question that brought you to the article in the first place. This is not one of those articles. Instead, this article explains to you what an NFT is and for sake of completeness, we will put someone else’s definition at the end.

To start, let us think back to a simpler time. A time when you could only purchase art from a local artist, and when art collecting was reserved for a select group of connoisseurs usually employed by museums and rich people. What gave the art collected value? What made a sketch from Da Vinci worth more than your local painter’s entire collection? The answers to these questions are fundamental in understanding what an NFT is (non-fungible token) and why it’s revolutionizing the world.

The short answer is quite simply perception. The art itself does not necessarily carry a great deal of intrinsic material value. It is the perceived value that determines its worth. Some people say, “Art is in the eye of the beholder.” and this is true. However, I would argue that it goes a little deeper than that. The perceived value in the eye of the beholder comes through knowledge.

Let us suppose that you know of a local artist, and you want to support their work. The mere fact that you would like to support them, already adds value to the artwork they produce, without you having to have seen it. Suppose then that this art they produce is a rather ugly picture of a daisy. Without the context of your perceived value, any other beholder would deem this to be just an ugly picture of a daisy.

However, what if sometime in the future, a different piece of this artist’s work is deemed “exceptional” resulting in them being catapulted into fame? Suddenly your ugly daisy picture becomes an “Original piece”.  Art dealers start calling you, collectors want to buy it and offer a small fortune. What changed? The piece surely didn’t. It’s still an ugly daisy. However, the perceived value amongst the beholders changed. (I promise I have nothing against daisies)

This is why some art is worth more than others. The more people know about and respect the artist, the more valuable the entire collection of art is.

Okay, so what about these NFTs? Well, if we fast forward from our “simpler time” to the age of the Internet, a problem arises for digital artists. There is no way to build knowledge and respect while maintaining value, at least not easily. If you’re a digital artist, your audience, or let’s say your “group of locals”, is on the Internet. However, we are starkly aware of what happens when you post a picture on the Internet; it is usually out of your control.

The Internet is built on this idea of public knowledge. Once you post, publish, or launch something on the Internet, anyone from anywhere can copy, paste, save, share, or even claim it as their own. This is why photos on the Internet have no intrinsic value and ownership is difficult to establish. Sure you can lock some stock photos behind a paywall, but if one person accesses them, they can send them to anyone.

Enter the revolution that is NFTs. For the first time in the history of the Internet, we have a way to verify the originality of a digital asset throughout its entire existence. An NFT, short for Non-Fungible Token, is a blockchain asset that is completely unique and its uniqueness is verifiable. This means that NFTs hold unique properties that make them distinguishable from digital assets such as Bitcoin. Bitcoin is another digital asset however one Bitcoin is indistinguishable from another.

So back to this idea of perceived value. The value of a single Bitcoin is largely determined by the free-market decisions made by those who buy and sell it. The value of one Bitcoin is set throughout the entire distribution of Bitcoin. In other words, 1 Bitcoin is indistinguishable from another. NFTs however, allow us to individually identify an asset, and guarantee its uniqueness. If you own a specific NFT, you’re the only one who owns it.

Being that this is the Internet, you can always screenshot, save and share digital works, but the unique fingerprint of an NFT allows you to prove that ownership of that work is yours. It’s akin to saying you can take a picture of the Mona Lisa and share it, but you could never claim you own it.

This is an incredible addition to the Internet. We can buy these NFTs from artists and tie intrinsic value to the work, and the best part is, value is no longer dictated by the connoisseurs at the museums only. Value is now dictated by the perceived value of the collective of the online community.

You may still ask yourself, “Why do people buy these NFTs?” To that, I say the same two reasons people have always bought art. People buy NFTs because, firstly, they think they will go up in value. Secondly, they like the creator behind the NFT and want to support them. It is worth noting that this space is also undergoing a silent revolution, as utility NFTs are being created but that is a topic for another day.

The crazy thing about these NFTs is that the underlying mechanism by which we fingerprint digital assets has a multitude of uses beyond art. NFT technology has made its way into trading cards, video content, digital copy (such as Tweets), virtual real estate, and even video game assets, such as Duo the NFT Card Game.

These new expansions in the NFT world have shown us that the potential of NFTs is endless. Who knows what the future may hold or what the potential usages will be? For now, we leave you this definition of an NFT from Investopedia, “Non-fungible tokens or NFTs are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency.”

This article was written for Stocktwits.com. Read the original article here.