What are NFTs?
To explain NFTs, let’s first remember how cryptocurrencies work: Every Bitcoin has the same value and utility: Meaning I can give you one of my Bitcoins, you give me one of yours in return, and we’d still have the same value. They are completely exchangeable by design. Another word for that is fungible.
Non-fungible tokens, or NFTs, are the opposite. They represent a group of assets that are not all the same. In fact, they are all different and one isn’t just like the other. Let’s take two digital images for example - both unique. They could be traded as an NFT. And just like with Bitcoin, the blockchain would record transfers to verify ownership.
So the difference between cryptocurrencies and NFTs is quite simple: While both can be traded on the blockchain, one represents an exchangeable value like a dollar bill, the other something that is uniquely valuable, like a collectible coin that is valued by its own rareness and unique condition.