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Commonly known as NFTs, non-fungible tokens are unique and non-interchangeable units of data that signify ownership of associated digital items that can be sold, traded, and stored within the blockchain, which dismisses the need for intermediaries. NFTs are commonly used to record and represent ownership of an item, verify authenticity, and enable exchange. The name "fungible" is derived from the fungibility of exchanging physical objects without modifying their value. The creation of NFTs is a way to ensure the uniqueness of a digital asset because it cannot be replicable and copied, which creates a limited availability of a commodity. When an item is non-fungible, its value is intrinsically connected to the item itself.
The use of non-fungible tokens within the gaming ecosystem is becoming ever more popular. It solves a fundamental problem regarding ownership of in-game goods. When a player buys an item inside a specific game, even if such an item costs money, it cannot be owned by the buyer because if the game developers decide to discontinue the platform, all in-game items will be lost. If the item is stored in the blockchain in the form of an NFT, it becomes genuinely possessed by the player, and it will continue to exist outside the game.
As NFTs represent a big market for collectible digital goods, artists also take advantage of NFTs to tokenize artworks to ensure ownership and distinctiveness to the pieces. NFT owners purchase only the right to the NFT's blockchain metadata or "token," not the underlying asset, unless otherwise specified in external contracts or terms and conditions. Another use case for such tokens is for the tokenization of physical assets, as it creates a digital counterpart of the physical good. Thanks to the immutability of blockchains, the tokenization of physical goods could be used to replace contracts automatically.