It seems to be the latest buzzword, just as cypto currencies start to make sense, along comes something new which leaves most of us asking what is a Non Fungible Token?
To start, let’s clarify ‘Fungible’. Collins describe Fungible as ‘replaceable or interchangeable with another of the same type’. Think of normal money as ‘Fungible’, you can swap one £10 note for another, or for two £5 notes, it is directly interchangeable. Something that is ‘Non Fungible’ has no direct interchangeability.
A good example of something which carries value but is ‘non fungible’ is art. We can all own a replica print of Monet’s ‘Waterlillies’ but only one person can own the original. There is no direct interchangeability.
When it comes to crypto currency and non fungible tokens we can apply the same theory about Monet but swap the artwork for something digital.
Twitter & Non Fungible Tokens
Twitter founder, Jack Dorsey, sold his first ever tweet for $2.9m. The digital ownership of that tweet was purchased in the same way as anyone sees value in artwork or collectible memorabilia. Rather than owning something tangible, there is a digital ownership.
If you are thinking ‘what the heck’ or ‘why would you do this’ then apply a slightly different perspective. In December 2021 Bruce Springsteen sold his entire catalogue for an estimated $550m. These days that music is simply a series of code, it is all digital. Whilst this was a sale of rights, you could easily apply the same to the first live recording of ‘Born To Run’ which could be sold as a NFT.
Put simply, the ‘token’ is the digital element rather than the tangible object.
The more everything is digitised the more these transactions are going to be seen, watch out for the growth in non fungible tokens.
By Dave Farmer
We normally focus on commercial finance and commercial mortgages, NFTs are something that has come out of client questions so hope it helps.