A non-fungible token (NFT) is a special type of cryptographic token which represents something unique; non-fungible tokens are thus not interchangeable. This is in contrast to cryptocurrencies like Bitcoin, and many network or utility tokens that are fungible in nature.
Non-fungible tokens are used to create verifiable digital scarcity. NFTs are used in several specific applications that require unique digital items like crypto-collectibles and crypto-gaming. Popular blockchain games like CryptoKitties make use of non-fungible tokens on the Ethereum blockchain. NFTs are used to represent in-game assets, which are in control of the user instead of the game developer. NFTs also find potential use in digital art, by helping prove authenticity and ownership.
The Ethereum community has adopted the ERC-721 protocol as a standard for Non-Fungible Tokens on Ethereum. Projects like CryptoKitties, CryptoPunks, and Decentraland follow the ERC-721 protocol for their NFTs.
Non-fungible tokens made their way into mainstream news when CryptoKitties went viral and subsequently raised a $12.5 million investment. RareBits, a Non-Fungible Token marketplace and exchange raised a $6 million investment. Gamedex, a collectible cards game platform made possible by Non-Fungible Tokens raised a $800,000 seed round. The creation of the Non-Fungible Token protocol (ERC-721) on the Ethereum blockchain has caused other blockchain projects such as NEO to begin development of their own non-fungible token standards.