My favourite definition of NFTs comes from Matt Levine’s column from Bloomberg:
"As far as I can tell the way most non-fungible tokens work is:
There is some normal commercial transaction. A band writes and records a song, which a record label releases, and the band and label receive royalty payments from Spotify. A professional basketball player does a good basketball thing at his job playing basketball; this good basketball thing is captured on camera and aired on a television network that pays the National Basketball Association zillions of dollars for the rights to show basketball. The New York Times publishes an article to its paying subscribers, serving up ads alongside the article. Jack Dorsey tweets a tweet on Twitter, the social network that he founded and that has made him a billionaire.
Someone - perhaps a party to the original commercial transaction (the band, the record label, the NBA, the broadcast network, the Times, Jack Dorsey, Twitter), perhaps not - “mints” an “NFT,” that is, they create a unique and immutable digital record, preserved on a blockchain, pointing to the commercial transaction and saying “boy howdy that commercial transaction sure did happen.”
Then the person who minted the NFT sells it to someone else for a lot of money.
The person who buys the NFT now owns a string of numbers on a blockchain that says “huh that other transaction occurred.”
The buyer generally owns nothing else: not the copyright to the basketball highlight, not the ability to go into Jack Dorsey’s Twitter account and delete his tweet, nothing.
I mean. Yeah."
