As we focus on finances this May, Casper Magazine has looked at e-commerce, ethical investing, and cryptocurrency – which got us curious about Non-Fungible Tokens (NFTs). These unique digital assets are rapidly gaining popularity, with more people buying and selling something a lot of people don’t even understand. So, let’s take a look at NFTs and how they’re changing how people see financial systems.

The confusion that comes with talking about NFTs often stems from the terminology involved (and even the name!). Non-Fungible Tokens tells us that they’re tokens that are not fungible, which doesn’t get us very far – but ‘fungibility’ is actually a fairly simple concept.

Something that is fungible has units that can be interchanged, with money being the most obvious example. You can exchange $20 for two $10 notes and it’s the same value, and the same goes for cryptocurrency: you can exchange one Bitcoin for another Bitcoin just like with physical currency. But NFTs are non-fungible, so they cannot be exchanged in this way. NFTs are unique digital assets in the same way that a painting is a unique physical asset: they can be sold but because they’re one-of-a-kind, they’re not interchangeable with another painting.

Let’s use the Mona Lisa as a specific example. There is only one genuine Mona Lisa in the world, so there can only be a single owner of it. Photos and prints of the painting are available for anyone to purchase, but people who buy those are not buying the original painting. The same principle works for NFTs: a single person or entity owns the ‘token’ – a piece of digital art, music, even a meme – and although other people can have copies of that token, there is only one owner of that unique token, i.e., the original. In this way, you can liken the NFT market to the physical art market, where people sell, bid on, and purchase unique pieces for their own collections – or to resell them.