December 7, 2023

What are NFTs or non-fungible tokens?

During the recent 1st Philippine Copyright Summit, Andres Guadamuz of the University of Sussex described tokens as digital representations of a good or service written on a blockchain which can represent anything, be it a character in a game, a work of art, airline tickets, frequent flyer miles, provenance, or coins, and is represented as a smart contract.

A blockchain meanwhile, he said, is simply an open, permissionless, cryptographic, and decentralized ledger. And because these ledgers are public and decentralized and since anyone can check past, present, and proposed transactions, there is increased reliability in the system.

Smart contracts on the other hand are implemented in codes using a common language such as Solidity and pegged to a cryptocurrency for automated payments and transactions. These transactions and contracts get written into the blockchain. These codes, Guadamuz emphasized, are immutable and openly verifiable transactions.

NFTs are those that are unique, such as a specific silver necklace or painting unlike fungible goods which by definition are interchangeable, no matter what specific item one is selling or buying. Examples of fungible goods would be silver, gold, oil and grain. NFTs are smart contracts that represent a non-fungible good and will always link to that one item. According to Guadamuz, there are NFTs for everything – music, art, game items, sport highlights, and even collectibles and profile…

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