What is an NFT? A Clear Guide to Non-Fungible Tokens

An NFT, or Non-Fungible Token, is a type of digital asset that represents ownership or proof of authenticity for a unique item or piece of content, stored on a blockchain. Unlike fungible tokens, such as Bitcoin, where each unit is interchangeable and holds the same value, an NFT is totally unique, meaning it has distinct properties that set it apart from any other token.

How Do NFTs Work?

NFTs are managed through blockchain technology, most commonly on the Ethereum network. Here’s a simplified overview:

• Minting: Creating an NFT involves minting, which records the unique metadata (e.g., creator details, ownership, and attributes) on the blockchain. Minting gives the creator proof of ownership and enables them to sell or trade the NFT in various marketplaces.
• Ownership and Transfer: The blockchain acts as a secure ledger, tracking who owns the NFT. When transferred or sold, the transaction is verified and recorded on-chain.
• Indivisibility: NFTs are typically indivisible, meaning you can’t split them like cryptocurrencies. They are sold or transferred as whole units.

Common Uses of NFTs

• Digital Art and Collectibles: Artists create and sell digital artworks as NFTs, enabling them to reach global markets and earn royalties on future sales.
• Gaming Assets: NFTs can represent in-game items such as characters or virtual real estate that players can buy, trade, or sell.
• Music and Exclusive Content: Musicians and creators use NFTs to offer exclusive songs or videos, sometimes bundling them with concert tickets or other perks.
• Virtual Real Estate: NFTs are used in virtual worlds to buy, sell, or trade land and items.

Key Features of NFTs

These are the features that have made NFTs a significant tool for creators, collectors, and developers.

• Uniqueness: Each NFT has specific attributes recorded on the blockchain that make it one of a kind.
• Proof of Ownership: Blockchain technology secures a tamper-proof record of ownership.
• Interoperability: NFTs can be utilized across various platforms or applications, especially in metaverse projects.

Other Glossary Terms