A non-fungible token (NFT) is a cryptographic token which lacks the property of fungibility. NFTs are, thus, unique assets.
The Long Explanation
A typical cryptographic token like Bitcoin is a fungible asset. What this means is that any one unit of BTC is exactly the same as any other unit of BTC chosen at random. These tokens can be exchanged without bias as all tokens are the same.
This property of fungibility isn’t unique to digital currencies. Everything from fiat currencies to even factory products are often fungible as units can be exchanged without loss of value. A dollar bill is a dollar bill regardless of its source, experience or owner.
For non-fungible tokens, the reverse is the case. Every NFT is a unique item hosted on the blockchain, that cannot be interchanged with another. You can think of them as tokenized real-world or digital assets, with verifiable proof of the history, authenticity and ownership on the blockchain.
NFTs can be used to represent a wide variety of items. Its most common use case is for the representation of digital art as unique items on the blockchain. But it has also been used for the creation and/or tokenization of digital collectibles, in-game assets, real estate, and more.
Today, multiple frameworks and decentralized applications exist for the creation, ownership, and transfer of NFTs. The most popular of these frameworks is the Ethereum-based ERC-721 protocol for issuing and trading non-fungible assets on the Ethereum network.
Although Ethereum was the first NFT blockchain, though, many other blockchains now support the issuance and trading of NFTs. There have also been efforts to standardize NFT protocols in order to allow for a greater level of interoperability within the digital art market.
Originally considered to be a digital equivalent for the global art market, NFTs have since become so much more – with even more room for expansion. Today, they’re used in video games, licensing and certification, and digital identity management.
With ownership and historic details of NFTs are stored on the blockchain, they’re believed to possess higher levels of data integrity and privacy.