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B: If you’re done being clueless about the cost of housing, let’s return to my example. Let’s assume I want to sell my house for 10 bitcoin. The problem is that my house is a physical object, but bitcoin transactions are digital. So I need to find a way to electronically represent my house in order to show that a transaction takes place.
A: How do you do that?
B: With metadata! I can add the house address to the blockchain. Or I could add the property information on file with the county, showing the actual borders. What I’m essentially doing is creating a token on the blockchain that represents the physical house I’m trying to sell.
A: A “non-fungible” token, I assume.
B: That’s right. The NFT represents the house, and the metadata can’t mean anything else. So I can set up a transaction where someone pays 10 bitcoin and receives the NFT representing the house, and voila — I just sold my house.
A: Hey, I actually understood that!
B: I know, right?
A: It’s a great example that clearly illustrates how an NFT might be useful tying physical items to digital commerce.
B: Thank you.
A: So obviously that’s not really what people are using NFTs to do.
B: Oh, absolutely not. What they’re actually doing makes far less sense.