An NFT (non-fungible token) is a unique digital token recorded on a blockchain that represents ownership of a specific item — a piece of digital art, a game item, a ticket or a membership. Unlike bitcoin or a euro, one NFT cannot be swapped one-for-one with another, because each is unique.
NFTs became famous in 2021, when a digital artwork by the artist Beeple sold at Christie’s for about $69 million. The hype faded, but the technology is still used for art, games, tickets and digital identity. This guide explains how NFTs work in plain English. If you are new to blockchains, start with how a blockchain works.
Key takeaways
- Fungible means interchangeable (one euro equals any other euro). Non-fungible means unique.
- An NFT is usually a pointer to a file, not the file itself, and rarely includes copyright.
- Most NFTs run on Ethereum using the ERC-721 or ERC-1155 standards.
- The NFT market is very illiquid and full of scams — many NFTs are now worth close to nothing.
What does non-fungible mean?
Something is fungible when every unit is identical and interchangeable: one €10 note is as good as any other, and one ETH is the same as any other ETH. Something is non-fungible when each unit is unique: a concert seat in row A, a house, an original painting.
An NFT applies this idea to tokens. Each NFT has a unique ID inside its smart contract, so the blockchain can tell exactly which one you own and record every time it changes hands.
How NFTs work
NFTs are created («minted») by smart contracts. The most common standards on Ethereum are ERC-721, where every token is unique, and ERC-1155, which supports both unique and semi-identical items such as game assets. NFTs also exist on other blockchains, including Solana and Bitcoin (via Ordinals).
Each NFT typically stores:
- a token ID and the address of its current owner;
- a link to metadata — a small file describing the name, attributes and the location of the image or media;
- optionally, rules for creator royalties when it is resold.
Because images are large, they are almost never stored on the blockchain itself. They usually live on IPFS (a decentralised storage network) or on an ordinary web server. If that server goes offline, the NFT may point to nothing.
What you actually own
Buying an NFT gives you control of a token on a blockchain. It does not automatically give you the copyright to the artwork, the right to use it commercially, or exclusive access to the image — anyone can still right-click and save it. What rights you get depends on the licence the creator attaches, which many collections never clearly define.
Think of it like a signed, numbered certificate of authenticity that everyone can verify, rather than ownership of the underlying intellectual property.
Real uses of NFTs
- Digital art and collectibles — artists sell work directly and can earn royalties on resales on marketplaces that honour them.
- Gaming — in-game items that players truly own and can trade.
- Tickets and memberships — event tickets that are harder to counterfeit, or tokens that unlock a community or service.
- Domain names — services such as ENS turn a long wallet address into a readable name like yourname.eth.
- Proof of attendance and credentials — certificates and badges that can be verified on-chain.
Risks and scams
- Illiquidity: there may simply be no buyer at any price. Many 2021-era collections now trade for a tiny fraction of their peak — or not at all.
- Wash trading: sellers trade with themselves to fake demand and prices.
- Fake collections and phishing mints: copies of popular projects and fake «free mint» sites that drain your wallet. Read our guide to common crypto scams.
- Malicious approvals: signing a marketplace approval on a fake site can give a scammer the right to move all NFTs in a collection from your wallet.
- Broken links: if the metadata or image is hosted centrally, it can disappear.
If you collect NFTs, use a separate wallet for minting and keep valuable items in a hardware wallet.
Frequently asked questions
Can I just screenshot an NFT?
Yes, you can copy the image. What you cannot copy is the on-chain record showing which wallet owns the token — that is what an NFT represents.
Are NFTs a good investment?
Most NFTs have lost the majority of their value since 2021, and liquidity is low. Treat them as collectibles or utilities, not as an investment, and never spend more than you can afford to lose. This is not financial advice.
Do NFTs harm the environment?
Since Ethereum moved to proof of stake in 2022, its energy use fell by more than 99%, so minting an NFT on Ethereum today uses very little energy.
How do I make an NFT?
Marketplaces let you mint an NFT by uploading a file and paying a network fee. Check which blockchain they use and what licence you are granting buyers.
Next step: understand the gas fees you pay to mint and trade, or learn how to protect your seed phrase.
