Overview
An NFT, or non-fungible token, is a unique digital asset recorded on a blockchain that proves ownership and authenticity of a specific item, such as art, music, or collectibles. Unlike cryptocurrencies like Bitcoin, each NFT is unique and cannot be exchanged on a one-to-one basis. NFTs turned digital files into ownable, transferable assets.
How It Works
NFTs are typically minted using the ERC-721 standard on Ethereum or similar standards on other chains. Each token has a unique identifier and metadata that links it to a specific item or image. Ownership is recorded on-chain, so it can be verified and transferred without an intermediary. NFTs can also encode royalties, giving creators a share of secondary sales.
Why It Matters
NFTs created a market for digital ownership and became a cultural phenomenon, with applications in art, gaming, membership, and identity. They demonstrated that provenance and scarcity can be enforced on public infrastructure. Their speculative peaks and subsequent declines, however, also showed the risks of hype-driven markets and the importance of distinguishing real utility from promotion.
Related Concepts
NFTs are built on the ERC-721 standard and connect to concepts like Digital Identity and Soulbound Tokens. They are bought and sold on Marketplaces and stored in Wallets, and their metadata lives off-chain in most implementations.