Glossary
NFT (non-fungible token)
An NFT (non-fungible token) is a unique token recorded on a blockchain that proves ownership of a specific item, such as a digital artwork, a game asset, a ticket or a domain name. Unlike a bitcoin, no two NFTs are interchangeable.
Also called Non-fungible token, NFT token, Digital collectible, ERC-721 token
See also
An NFT, short for non-fungible token, is a token on a blockchain that is unique and cannot be swapped one-for-one with another. “Fungible” means interchangeable: one dollar or one bitcoin is worth exactly the same as any other. An NFT is the opposite. Each one has its own identifier and owner, which makes it useful to represent a specific item: an image, a piece of music, a game character, a concert ticket or a membership pass.
How an NFT works
An NFT is created (“minted”) by a smart contract that keeps a list of token IDs and the wallet address that owns each one. On Ethereum, most NFTs follow the ERC-721 standard, which defines common functions such as checking the owner of a token or transferring it. Because the standard is shared, wallets and marketplaces can display and trade NFTs from any project.
The token itself is usually small: it stores an ID and a link to metadata (a name, a description, an image). The image is often stored elsewhere, on a web server or on a decentralized storage network such as IPFS. What you own is the token pointing to the file, not necessarily the file or its copyright.
A simple example
An artist publishes a collection of 100 drawings. Each drawing gets a token, from ID 1 to ID 100. You buy token 42 for $200. The blockchain now shows that your wallet owns token 42. Anyone can still view or copy the image, but only you can sell or transfer token 42. If you resell it for $300, the contract can automatically send a royalty, say 5% or $15, to the artist, if the marketplace honours it.
Why NFTs matter
NFTs give a public, verifiable record of who owns a digital item and of its history, without relying on one platform. Beyond art, they are used for tickets, in-game items, domain names, event badges and loyalty programmes. They also show how a blockchain can track ownership of any unique asset.
Risks and limits
- Prices are driven by demand and can drop to almost zero; many collections become illiquid.
- If the metadata or image is hosted on a centralized server that goes offline, the NFT may point to nothing.
- Buying an NFT rarely gives you copyright or commercial rights unless the licence says so.
- Fake collections, phishing “free mint” links and malicious signature requests are common. Read our guide on how to avoid crypto scams.