NFTs (Non-Fungible Tokens) as an umbrella term just means that each digital token on the network is unique. Each token contains some small bit of data that is unique to the token in question. That’s it. They’re just little data containers being shipped around the blockchain between addresses.
Now, NFTs on specifically ETH have a few data points that are unique to why anyone cares about them. (It’s also likely other networks will implement some or all of these features, if they have not already.)
You can check our detailed guide on what are NTFs here, this is a informative site with all information related to Non-Fungible Tokens.
A Royalty % may be set in the NFT token. When the NFT is then traded at any point in time, between any two addresses for ETH/currency, the royalty cut of that ‘sale’ will be redirected to the Creator’s ETH address.
Now, before we go any further, it’s important to understand one more aspect of NFTs. They are very, very small. It is exorbitantly expensive to store real data on a blockchain, even something as small as a 128×128 jpg. Most NFTs are only going to have a few bytes of data stored in them. Like, for example, a serial number or URL.
In short, an NFT is basically a unique scrap of paper with a serial number, password, or web address on it. That’s it.
In this case, an NFT would contain some variety of unique data, only visible to the address it is owned by, such as a unique URL, or password to a secret clubhouse. If the buyer has a reasonable belief that this information is still secret, buying/trading the NFT becomes the primary way to obtain it. Some Rarible sales attempt to go this route, however, the issue here is obvious. It’s the internet, nothing stays secret for long, and you have no guarantee that the creator or previous owners have not shared the secret information into the wild.
The biggest real success story for NFTs right now are systems like TopShot, CryptoKitties, CryptoPunks, etc. Cases where a website/app/game can interact with the NFTs directly to show you your content, as a proof of ownership of that content, enforced by the app/game. Likewise, NFTs have big potential for game item marketplaces as the company can issue their items with some royalty rate (ex. 1%), and always get a cut of sales if their game (and trade of its items) takes off.
NFTs can also make for good ‘proof of attendance’/historical proof type tokens, which is to say, you could be given one for attending a concert as proof you were there.
