What is an NFT?

What does that even mean?

Well, non-fungible (or “non fungible”) describes a type of digital asset which is not interchangeable with another one instance of the same type. So for example, when you buy an apple from a farmer’s market, the apple is both measurable and unique to itself — it has its own weight and color which makes it different from any other apple in the world.

NFTs are a type of blockchain token. What’s different about them is that they can represent anything you want, and they can be uniquely identified and verified on the blockchain. These characteristics make NFTs perfect for managing ownership of digital creations. Some types of NFT digital art include custom skins in games like Fortnite, or limited edition virtual sneakers created by Nike and released on the blockchain.

For example, a game developer could create collectible NFTs for its in-game characters. Users would be able to trade these NFTs as they do other digital goods. This is much more flexible than traditional game micro-transactions where the same coins might be used in different games.

The blockchain solves the problem of verifying ownership of digital creations. For example, imagine you are creating a cat sweater. You upload the design to a blockchain like Ethereum and then put it up for sale. When someone purchases it, it is transferred from your wallet to the buyer’s. Each product is uniquely identified by its hash on the blockchain, so there is no problem with someone re-selling that exact sweater to multiple people.

Some vendors are already accepting NFTs as currency in payment. This is probably the most practical way to use them right now. But as the technology progresses and gets better integrated into games, NFTs will become more common and easier to use.

As game economies become more intertwined and features like cross-game item trading grow rarer, game developers will need to find ways of incentivizing users through virtual goods rather than just gameplay itself. Here, NFTs can be a good solution for strengthening user loyalty.