Non-fungible tokens (NFTs) are assets that have been tokenized via a blockchain. They are assigned unique identification codes and metadata that distinguish them from other tokens.

Unlike cryptocurrencies which are interchangeable, NFTs are non-fungible - each token is unique and not swappable even if they look identical. This makes NFTs verifiably scarce digital assets, while cryptos on the same blockchain are fungible.

What is a Non-Fungible Token (NFT)?

NFTs are created through a process called minting, where the NFT's information is recorded on a blockchain. Minting involves creating a new block, validating the NFT data, and finalizing the block. Smart contracts are usually incorporated to manage ownership and transferability.

When minted, each NFT gets a unique identifier tied to a blockchain address. Every token has a recorded owner, so ownership is publicly verifiable. Even if thousands of identical NFTs are minted, each has a distinct ID.

How do NFTs work?

Digital Art
NFTs are most commonly associated with digital art. Artists mint NFTs to sell works like illustrations, GIFs, videos, etc. as verifiably scarce.

Metaverse
NFTs are integral to metaverse platforms, where they act as deeds representing virtual real estate and items. The ownership is recorded on blockchain.

Collectibles
NFTs are used to represent collectible items like sports highlights, memes, branded merchandise and more. Their scarcity creates value.

Gaming
NFTs can represent in-game assets like character skins, power-ups, land plots etc. Players truly own these assets.

Music
Artists are exploring NFT albums/tracks as a way to monetize and engage fans. The NFTs provide exclusive perks.

What can NFTs be used for?

Bored Ape Yacht Club (BAYC) is arguably the most renowned NFT collection, achieving broad recognition even beyond NFT circles. Featuring unique cartoon ape avatars, BAYC has become an iconic symbol of the NFT movement, aided by celebrity patrons. Beyond just the art, owning a BAYC token grants access to an exclusive online club and real-world events, fostering a sense of community around the collection.

CryptoPunks contains 10,000 algorithmically generated pixelated character heads, each one unique. Originally one of the first mainstream NFT projects, CryptoPunks have now become hugely popular digital artworks in their own right. The easily recognizable punk avatars have a nostalgic, retro internet aesthetic reminiscent of late 90s/early 2000s web culture. This, along with their significance as pioneering NFTs, adds to the appeal and value of scarce CryptoPunks.

Otherdeed is an NFT virtual land collection from the Bored Ape Yacht Club creators. The 3D land plots contain detailed environments and artifacts. BAYC owners could claim land, while other plots were distributed separately. Capitalizing on BAYC's popularity, Otherdeed quickly became a top NFT project. Its virtual real estate concept and BAYC connection propelled its growth as a top collection.

Examples of NFTs

Where to buy NFTs?

NFTs can then be purchased on NFT marketplaces. Here are some of them:

One of the largest NFT marketplaces providing a wide range of NFTs across diverse categories, including art, music, fashion, sports, games, and collectibles. Additionally, the platform offers various educational materials for users.

Nifty Gateway provides collections featuring renowned artists in various mediums such as multi-media, video, fine art, and animation. The platform is targeted at buyers who are focused on building a valuable long-term art collection or engaging in art trading.

Rarible is a marketplace to buy, sell and trade NFTs and digital collectibles using cryptocurrencies like Ethereum. The platform facilitates NFT trading by letting users easily exchange scarce digital assets, with governance enabled through its native token model. In 2021, Rarible partnered with Adobe to secure NFT metadata.