November 19, 2021
NFTs: Non-Fungible Tokens – A Very Simple Explanation

Personal Finance


5 min read

Non-Fungible Tokens.

NFTs give you something that can’t be copied. Not a picture itself (anyone can take a screenshot). Here we’re going to use art as an example, because its most common nowadays, but NFTs can be used for real estate, contracts, and a number of other things.

Let’s break it down:

  • Non-Fungible = this means what you’ve bought is one of a kind.
  • Token = They’re stored in an electronic envelope that only you own.

Instead NFTs give you ownership of the work. And that means if someone else uses it, you can charge them royalties etc.

To put it in terms of physical art: Anyone can buy a print of Van Gogh’s starry night, but only one person can own the original.

So I don’t own this painting and I don’t have digital rights to make money off of it’s use. Instead I copied it from Wikipedia, which has rights and allows others to use it. I don’t own the original, and wikipedia doesn’t either.

But what if I did own it? 

NFTs are a digital means for proving the ownership of an asset, like your car’s title proves you own it. Add to that with an NFT, you can also track who has owned that digital asset in the past and what was done with it, just like getting a Carfax tells you the history of your car’s sale and repair.

Now imagine that you signed your car up for Turo, so that you could rent it out when you’re not using it. NFTs track who used it and how much money they have to pay you as well, in addition to transferring the money they owe to you automatically.

For the most part, NFTs right now are being used as overpriced collectibles on the internet. As they progress, you’ll find more sophisticated ways of documenting, selling, and licensing the use of assets. I am long the idea of NFTs as a technology solution, short the idea that a JPG is worth millions of dollars :).

Shariah Compliance:

Are NFTs permissible to own and trade? Well the short answer is: Yes, as long as the digital asset is permissible. So when buying an NFT, you’ll need to look at what the subject matter is and what its use/purpose is. If its allowed, then by all means go ahead, but don’t waste money on overpriced, hyped up goods!


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