NFT: what it is and why it matters for the digital world

If you often see the abbreviation NFT in the crypto community but are unsure what it means, you are not alone. Non-fungible tokens are a relatively new technology that rethinks the concept of ownership in the digital realm.

Basic Definition of NFT

NFTs are cryptographic coins recorded on the blockchain. Each such coin represents an exclusive right to own a specific digital asset. These can be works of art, collectible cards, virtual real estate, in-game items, or even tickets to events.

The key difference between NFTs and other digital assets is their uniqueness. Each token has its own identifier and cannot be duplicated or replaced by another, even if they have the same value.

What does “non-fungibility” mean?

The term “non-fungible” describes items that cannot be simply exchanged for something equivalent. Take for example: one US dollar can be freely exchanged for another dollar, as they are identical. This is an example of a fungible asset.

With NFTs, it is different. Each token has unique characteristics, which means it cannot be exchanged for another at a standard price. The value is determined by rarity, market demand, and how much a collector values a specific asset.

How do non-fungible tokens function?

The NFT technology is built on several key components:

Blockchain as a foundation. NFTs exist on the blockchain, which serves as a decentralized ledger of all transactions and ownership rights. This system is immutable and transparent — the history of each NFT is fully traceable, confirming its authenticity.

Smart contracts. Self-executing programs automate the creation, transfer, and management of NFTs without intermediaries. They ensure compliance with all terms of the transaction.

Token Standards. In order for NFTs to operate compatibly across different platforms, unified standards are used. On Ethereum, this is ERC-721, and on BNB Chain — BEP-721. These standards define the rules for creating and managing tokens.

Minting Process. The creation of an NFT is called minting. At this stage, a digital file is transformed into a unique asset on the blockchain with its own coin identifier. The new owner receives exclusive rights to use and display this asset.

Where are NFTs used in real life?

Digital art and collecting

Artists and creators use NFTs to monetize their works. Instead of selling a single copy, they can issue a limited number of unique digital copies, each with its own certificate of authenticity. Collectors gain the opportunity to own rare pieces and showcase them in virtual galleries.

Gaming industry

In Play-to-Earn games, NFTs act as gaming assets — characters, equipment items, and land plots. Players can earn NFTs during gameplay and then trade them on the open market, creating a secondary economy within the game.

Tickets and Access

Event organizers are increasingly issuing tickets in the form of NFTs. This guarantees immutable proof of ownership, eliminates counterfeit tickets, and allows owners to resell them without intermediaries. NFT tickets can provide additional bonuses - VIP access, exclusive content, or special offers.

Staking and DeFi

Some decentralized finance platforms allow NFT owners to lock them as collateral and earn rewards in the form of interest or coins while maintaining ownership.

Iconic NFT Projects

CryptoPunks. One of the first and most iconic NFT projects, launched in 2017. The collection consists of 10,000 pixelated characters, each with unique traits. Many celebrities use them as avatars on social media. The success of the project marked the beginning of digital art in the NFT era.

Bored Ape Yacht Club (BAYC). A later, yet no less successful project. It consists of 10,000 hand-drawn monkeys with various characteristics. Each NFT gives the owner access to exclusive events, activities, and virtual spaces, combining art with community membership.

Decentraland. A virtual reality platform on the Ethereum blockchain where users can trade virtual land and in-game items. It is one of the main projects defining the development of the metaverse and virtual real estate.

Common Myths About NFT

Myth 1: NFTs are completely protected from risks

In reality, NFTs inherit the security level of their underlying blockchain. However, this does not exclude fraud, phishing, or vulnerabilities in smart contracts. There is a risk of forgery and copying of copyrighted materials without permission.

Moreover, the NFT market is volatile and speculative. Although some NFTs have reached record prices, long-term stability of value is not guaranteed. Security also depends on the chosen blockchain — different networks have different levels of protection.

Myth 2: NFT and cryptocurrencies are the same

Although both are digital assets on the blockchain, they serve different purposes. Cryptocurrencies are intended for transactions and are interchangeable — one bitcoin is equivalent to another.

NFTs are unique assets. They are non-fungible and cannot be used as a means of payment like regular currency. The value of NFTs lies in their uniqueness and rarity, rather than in their exchange rate.

Conclusion

NFT what is it? — these are cryptographic coins that confirm ownership rights to unique digital assets. They open new opportunities for artists, gamers, and collectors, allowing them to create, buy, and sell digital items with verified authenticity.

However, like any investment, NFTs come with risks. Before entering the market, it is important to understand the technology, assess volatility, and not invest more than you are willing to lose. NFTs are not just a trend, but a new tool rethinking digital ownership.