How does non-fungible tokens work?

What are Non-Fungible Tokens?

Non-fungible tokens, or NFTs, are a type of digital asset that is unique and cannot be divided into identical units. This makes them different from traditional cryptocurrencies like Bitcoin and Ethereum, which can be subdivided into smaller units. NFTs are often used to represent valuable assets like collectibles or gaming items.

How do Non-Fungible Tokens Work?

Non-fungible tokens are created on a blockchain platform using smart contracts. These contracts allow for the creation of unique tokens that cannot be divided into identical units. When a new token is created, it is assigned a specific ID number that is stored on the blockchain ledger. This number ensures that each token is unique and can never be replicated or divided into smaller parts.

The use of smart contracts also allows for the secure transfer of ownership rights for NFTs between parties. When someone transfers an NFT to another person, they are essentially transferring ownership rights to that token. This helps to ensure security and trust between buyers and sellers.