Because each NFT is stored on a blockchain and assigned a unique identifier it is impossible to create a duplicate. One of the benefits of NFTs is that they can’t be counterfeited like traditional physical assets. This allows users to buy, sell, transfer, or trade these digital assets just as they would with traditional assets like stocks and bonds.
One of the key features of NFTs is their ability to be traded on decentralized platforms like blockchain networks.
The NFTs can be said to be anchored on the blockchain network with the ability to access the actual asset from the centralized storage which is also termed the off-chain storage. The diagram below represents how an NFT representing digital art is stored on the blockchain with a unique ID and a link to access the digital art which is stored in off-chain storage. The key difference is that NFTs store information about the asset itself on the blockchain rather than just storing details of the transaction.
Non-fungible tokens are stored on a blockchain, similar to how cryptocurrency transactions are recorded on a blockchain. Some common examples of NFTs include digital game items, collectible art pieces, or virtual real estate. NFTs are used to represent digital assets that are unique and cannot be replaced. Non-fungible tokens have the potential to change the way we interact with digital assets and could potentially revolutionize the way we trade and use these assets in the future. This is in contrast to cryptocurrencies like Bitcoin, which are fungible tokens, meaning each Bitcoin is the same as any other Bitcoin. The word non-fungible means that each token is not interchangeable with another token. Non-fungible tokens are unique digital assets. What are Non-fungible tokens (NFT) and how do they work?
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