What are NFTs?

Non-fungible tokens, beyond the hype.

TL;DR

An NFT (non-fungible token) is a unique digital asset on a blockchain. Unlike fungible tokens (1 BTC = 1 BTC), each NFT is one-of-one. They proved themselves as a primitive — the speculative mania around them, not so much.

What 'non-fungible' means

Fungible: every unit is interchangeable. Non-fungible: each unit is unique with verifiable provenance — like a serial-numbered card on-chain.

Common use cases

Beyond JPEGs, NFTs are infrastructure for any 'unique digital thing'.

→Digital art — CryptoPunks, Bored Apes, Art Blocks
→Game items — characters and skins that move across games
→Profile pictures (PFPs) — community membership tokens
→Domain names — ENS maps names to wallet addresses
→Tickets — emerging use case
→Real-world asset titles — experimental

Standards

ERC-721 is Ethereum's NFT standard. ERC-1155 added semi-fungible support (mint multiple copies). Most chains have equivalents.

Worked example

Buying an NFT — what happens

Buying a Punk on a marketplace.

1BrowseFind a Punk listed at 30 ETH
2Connect walletMetaMask signs in
3BuyApprove 30 ETH transfer + small gas
4SettlementTransaction confirms in seconds
5ResultWallet holds the unique token ID

Takeaway

You own the on-chain token. The image is usually hosted off-chain — the NFT is the verifiable receipt.

Common mistakes

What to avoid

!Treating NFTs as correlated to BTC — they cycle differently and are far more illiquid
!Believing 'rare = valuable' — rarity only matters with demand
!Storing high-value NFTs on a hot wallet — phishing is everywhere
!Approving unlimited spending on marketplaces — revoke approvals you don't use

Self-check

Test yourself

Q1What does 'non-fungible' mean?+

Each token is unique and not interchangeable with others — opposite of fungible currencies like Bitcoin.

Q2Why does off-chain image hosting matter?+

If the server goes down, the NFT exists on-chain but the artwork may be unretrievable — IPFS hosting vs centralised hosting is a real distinction.

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