• Kara Holm

A Young Person's Guide to NFTs

Here’s a problem you need to solve.

Let’s say you have a rare Pokémon card you like very much. Your friend Sam gave it to you in exchange for one of yours that he wanted more. Sam originally got the card from Fred, who claims that he never gave Sam the card. How can you prove this card is yours?

Today we’re going to discuss NFTs, which are a way of solving that problem in the digital universe that includes things you can see and do on phones, computers and tablets.

NFT stands for "non-fungible token". Let’s break this phrase down to see what it means and how it works.

"Non-Fungible" is a funny phrase that is a fancy way of saying that something is one-of-a-kind or unique. That something could be a picture or video or music or anything else that can be saved in the cloud to view or experience on a phone, computer or tablet. It can also have benefits in the real world.

"Token" refers to the permanent digital record that indicates ownership and the contents of the one-of-a-kind item. The NFT lives in the “blockchain”. The blockchain is computer code that has no “undo” button, but can have new information added. The blockchain is like a certificate of authenticity to prove something is real.

The NFT has value because it is one-of-a-kind, and that uniqueness can be verified by the code in the blockchain, meaning there is no doubt about what the item is and who owns it. In the art world this is called “provenance” which is a record of how artworks are passed from one person to the other.

Returning to our original example of the Pokémon card: imagine that when Fred gave Sam the card, that change of ownership was recorded in the blockchain indicating your names, the type of card, the date and time. Then when you traded your card for Sam’s that was also recorded in the same way. So, when Fred changed his mind about giving up the card, you would be able to show him that the card does, in fact, belong to you.

One last point. You will know that some Pokémon cards are more valuable than others. When something is rare and many people want it, the item in question becomes even more valuable. The card that you have that Fred wants back may be worth more now than when you received it from Sam. This is true of NFTs as well. There is a chance that they will become more valuable – over time – but there is no guarantee!