The world of cryptocurrency has introduced many new terms and phrases into online conversations everywhere. Lately, much attention has fallen on NFTs and their meteoric rise in popularity. NFTs, or Non-Fungible Tokens, are a subset of digital assets that live on blockchains. Like the original Bitcoin, these assets are crypotgraphically secured in an online ledger shared by users via a decentralized peer-to-peer network. Currently, most of these can be assigned one of three categories: NFTs, tokens, and coins.
Coins
The cryptocurrency space has produced many coins with large, strong communities that support and promote their success, usually measured by the current exchange rate to more conventional currencies. Bitcoin’s creator was an anonymous person or persons going by the name Satoshi Nakamoto who chose to release the code that runs the Bitcoin network as open source, meaning anyone is free to duplicate it with or without changes. Almost immediately, new versions of the cryptocurrency sprang up, some with new features or changes to address perceived shortcomings in the original Bitcoin, many simply attempting to cash in on the viral nature of its success. In crypto parlance, these are known as “alt-coins.” Since 2011, hundreds, if not thousands, of these coins have come and gone, with only a few achieving longevity and value anywhere near that of BTC. These coins are almost all meant to serve as currency, to be bought, sold, traded, and used to facilitate transactions of goods and services both on and offline.
Tokens
Ethereum is one of the most popular and established blockchains after Bitcoin, mostly because it allows the creation of tokens on its network, in addition to its native currency Ether. These tokens behave in a fashion similar to coins, but the additional programming capability of the ETH network supports more traits and properties than found in typical cryptocurrency coins. Various projects have created tokens on the ETH blockchain to serve as social currencies for projects or individuals, as utility tokens for an in-game economy, or digital badges that act as “proof of attendance.” While these assets have more specific use cases than currencies, they are still most often fungible, meaning any one token can be exchanged for a similar one with little to no loss of value.
NFTs
The most recent and viral additions to the crypto digital asset space are NFTs. What sets these apart is their uniqueness. Each asset is linked to an item that obtains its value, at least partially, from its social value and utility. Some of these assets are game pieces, some are collectibles, and some are works of art or music. The token ID can be thought of as a digital certificate of authenticity, that doubles as a layer of information and utility limited only by the imagination of the creator. Artists, musicians, and developers are pushing the boundaries of what can be tokenized and sold on the blockchain.
Admittedly, there are those only looking to make a quick buck, either by regurgitating mountains of low effort material, or by stooping to outright copyright infringement and other deceptive practices, so buyer beware. Most platforms and projects are working hard to implement best practices for user safety, but much of the NFT space is still in the “wild west” phase, like many other movements based on cryptocurrency fundamentals.
