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We thought that the easiest way to understand the 'non fungible' would be to start with the 'fungible.' On the street, fungible is something that can't be distinguished from another thing, it is interchangeable, substitutable or uniform.
For example, before a commodity can be traded on a commodity exchange it must be fungible.
In the real estate domain, NFTs are unique digital titles (tokens) to property, either real or virtual, that are stored on a blockchain ledger.
Today, everything from selling homes to mortgages are being tested as NFTs to improve workflows, transparency, and speed in real estate transactions - often complicated by never ending layers of document verification involved.
NFTs are pretty easy to implement and execute as a gimmick/souvenir, but it's a whole new token-game to apply them on the high street.
Real estate NFTs work just like any other NFT. They're bought (meaning you have purchased a share in the property) using a cryptocurrency, held in a digital wallet, and, if speculative, are sold again for a profit.
😎 Real estate NFTs promise easily traceable, secure records of ownership for a wide range of real estate investments. Currently, they are the only way to buy and sell virtual land/property in the metaverses, which are emerging as an investing frontier.
😳 Like all things crypto, real estate NFTs are volatile too, and their value can go to zero without warning. Real estate NFTs in virtual real estate are risky investments for the time being, while NFTs that represent fractional ownership in real world property should be more stable.
When two things are completely different and distinguishable with doubt, they are non fungible.
Non Fungible Tokens (NFTs) And Real Estate
Practical Applications Today
The immovable property world requires two kind of tokenisation:
- Fractional Ownership: FO tokenisation is simple and already in limited-case use in the industry. It's similar to, say a crowdfunding platform that allows investors to buy shares. Each fractional owner of the property owns a number of tokens that represents shares in the property.
- Entire Asset: EA tokenisation is where NFTs begin to balk, because this concept fails unless the actual property deed is turned into an NFT. That will require a policy change from governments all over the world, as there must be a new asset class created for an EA token to exist for a real estate deed.