PAW Documentation

NFTs Explained


What are NFTs?
Non-fungible tokens (NFTs) are unique digital assets that have been tokenized via a blockchain. They are distinct identification codes created from metadata through an encryption function. These tokens are stored on a blockchain, while the assets themselves are stored elsewhere. The connection between the token and the asset is what makes them unique.

How NFTs Work:
For example, you could take a picture (which has metadata attached to it) and tokenize it on a blockchain. Whoever has the private keys to that token owns whatever rights you have assigned to the token.

Key Characteristics of NFTs:

  • Non-Fungible: Unlike cryptocurrencies, which are interchangeable (fungible), NFTs are unique and cannot be exchanged on a one-to-one basis.
  • Unique Identification: Each NFT has a unique identification code that distinguishes it from other tokens, even if they appear identical.
  • Exist on a Blockchain: NFTs are stored on a blockchain, ensuring their authenticity and provenance.

Applications of NFTs:

  • Digital or Real-World Items: NFTs can represent digital items like artwork, music, and videos, or real-world items like real estate and collectibles.
  • Efficiency and Security: Tokenizing real-world tangible assets makes buying, selling, and trading them more efficient and reduces the probability of fraud.
  • Representation of Rights: NFTs can represent individuals' identities, property rights, and other forms of ownership.

Benefits of NFTs:

  • Ownership and Control: Owners of NFTs have full control over their assets, including the ability to transfer or sell them.
  • Transparency: The blockchain provides a transparent and immutable record of ownership and transaction history.
  • Accessibility: NFTs make it easier to access and trade unique assets on a global scale.