There have recently been some news articles about large amounts of money being paid for non-fungible tokens (NFT). While I can't explain the astronomical price of an NFT, I can enlighten you on what an NFT is.

If you refer to a dictionary for fungible it means that it is an item that can be replaced by another or mutually interchangeable with another item. If you were buying a packet of cornflakes from the supermarket, all the cornflake packets on the shelf are the same. They are fungible, as one can be used to replace the other and it's still the same item.

In the digital world for example, one bitcoin is the same as another bitcoin. They are fungible and can be swapped to replace each other. With something that is non-fungible, it essentially means that it is one of a kind. It can't be replaced with another token.

So, in a similar way to owning a piece of artwork, each NFT is an original. It's from this uniqueness that value can be created. The NFT is a digital representation of a unique asset. This might be a piece of artwork, a tweet or even a video of a sporting moment.

As an NFT is digital, you would think that it would be easy to create more copies.

The key to the uniqueness of an NFT is that it is a unit of data stored in a blockchain ledger.

In essence a blockchain ledger is a record keeping method that stores the entire history of the item in chronological order.

By using a blockchain ledger the NFT will always contain a history of who created it and the current ownership.

Currently, much of the conversation surrounding NFTs is about the large amounts of money paid for tokens linked to artworks, but there are other uses for NFTs. As an NFT is a unique token, it can be linked to physical assets.

For example, in trade a non-fungible token could be created for each consignment of freight so that a purchaser can see the unique history of a product's creation and delivery.

An NFT could even be used as an electronic passport, as it would contain the unique details of the passport holder.

Another future use for an NFT might be linked to a property title where it would then contain all the relevant details and prior ownership of the title.

Having NFTs as part of the business process could make trade and transfer of products easier. It has the ability to prove current ownership and allow the purchaser and vendor to trade directly removing intermediaries and streamlining processes.

I expect non-fungible tokens to be embedded into more of our daily lives in the near future.

But, as to the value placed on NFTs, all I can say is that beauty is in the eye of the beholder.

If you would like to find out more on this topic, please contact Findex on albury@findex.com.au