In a nutshell, Non-fungible tokens (NFTs) are cryptocurrencies that do not possess the property of fungibility.
A non-fungible token is a special type of cryptographic token which represents something unique; non-fungible tokens are thus not mutually interchangeable. This is in contrast to cryptocurrencies like bitcoin, and many network or utility tokens that are fungible in nature.
Art was an early use case for blockchain. NFTs prove authenticity and ownership of digital art. The launch of CryptoPunks In June 2017 paved the way for “rare” art on the Ethereum Blockchain. DADA.art built from the CryptoPunks model and launched the first marketplace for rare digital art in Oct 2017.
Later, popular blockchain games like CryptoKitties made use of non-fungible tokens on the Ethereum blockchain. NFTs are used to represent in-game assets, and are controlled by the user, instead of the game developer. This lets the assets be traded on third-party marketplaces without permission from the game developer. Marketplaces for rare art include Nifty Gateway, Rarible, Known Origin and MakersPlace.
Specific token standards have been created to support the use of blockchain in gaming. These include the ERC-721 standard of CryptoKitties, and the more recent ERC-1155 standard.
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 NFTs, raised a $800,000 seed round.
Decentraland, a blockchain-based virtual world, raised $26 million in an initial coin offering and had a $20 million internal economy as of September 2018.