Skip to main content

NFTs

In this lesson, we talk about what an NFT is, and some examples of how it can be used.

Learning objectives​

  • Fungibility: Understand what makes something fungible.
  • Uses and Value: Understand the use of NFTs, and what makes something valuable.

Content​

Script​

Expand for the full script

0:00
NFTs, or non-fungible tokens, can be used to provide proof of ownership, handle licenses and royalties, and ensure uniqueness for digital entities and even real-world items.

0:20 Let's start at the basics. An item is non-fungible if it can not be interchanged for another identical item. For example, an original painting, a driver's license, or even a family heirloom. These items are unique and can't be substituted for something of "equal value" since any other item would not have the same properties.

0:40 Since digital items can be inherently duplicated, we need to pair the item with something that isn't. An NFT is a token on the blockchain that represents an item. This item could be physical and the NFT is a sort of registry of ownership on the blockchain, or the item could be digital, with the NFT serving as the non-interchangeable component.

1:00 NFTs can be used to provide ownership provenance, such as the sale and resale of digital art. They can also provide a mechanism of distributing royalties to the original author upon resale.

1:20 NFTs can also provide a method of verifying and transferring more ethereal concepts such as digital memberships and ecosystem specific assets. It's an important point that just because something is non-fungible, it is not inherently valuable. For example, a family heirloom is non-fungible, and may have emotional value to one person,

1:40 but it does not have true value outside of a specific context. NFTs are a tool that is useful for providing a new way to work with digital items. They do not themselves create value.

Common gotchas​

  • Size Limitations: Because there is a limit to how large a single transaction can be, it is very rare to have the digital item itself embedded in the NFT. The token will instead contain a reference to the item that is hosted elsewhere.
  • NFTs are Data: It is common to think of some type of image or art when thinking of NFTs. This is a very limited view. NFTs are essentially data objects that can contain references to other digital assets, or simply be the data object itself. The referenced asset may be a piece of digital art, but it could just as easily be a document, contract, application, etc.

Knowledge check​

Question 1 - Fungibility

What makes something fungible?

Answer (expand when ready to see the answer)

Something is fungibile if it can be easily substituted for another item.

Question 2 - Physical vs. Digital

True or False; An NFT can really only represent digital assets.

Answer (expand when ready to see the answer)

False. An NFT can also represent physical assets, and serves as a registry on the blockchain.

Question 3 - Value

True or False; Minting and NFT makes the underlying asset valuable.

Answer (expand when ready to see the answer)

False. Simply being an NFT does not make it valuable. NFTs are a tool to handle digital assets in a new way.

Additional resources​

  • More about primitives: guides for each primitive, and how to use them.
  • In depth NFT guide: how to mint an NFT.
  • Chialisp detailed documentation: detailed information on all aspects of chialisp.
  • Support in discord: for further support join our discord server and ask in the #chialisp or #support channels.