What is an NFT?
A Non-Fungible Token (NFT) is a token on a blockchain that represents a unique item. Unlike fungible tokens (where 1 USDT = 1 USDT), each NFT has a unique identifier that makes it distinct from all others.
Fungible vs non-fungible
- Fungible — interchangeable. 1 USDT = 1 USDT. 1 BTC = 1 BTC.
- Non-fungible — unique. CryptoPunk #1 ≠ CryptoPunk #2.
What NFTs represent
NFTs can represent:
- Digital art and collectibles
- Gaming items (weapons, characters, land)
- Music and video rights
- Event tickets
- Membership passes
- Real-world asset ownership
NFTs in DeFi
NFTs intersect with DeFi in several ways:
- NFT liquidity positions — PancakeSwap V3 represents each LP position as an NFT
- NFT collateral — some protocols accept NFTs as loan collateral
- NFT staking — stake NFTs to earn token rewards
- NFT-gated access — hold an NFT to access exclusive DeFi features
NFT market reality
The NFT market is highly speculative. Most NFTs lose value over time. NFTs with genuine utility (gaming items, LP positions) are more defensible than pure collectibles.