NFT

An NFT (non-fungible token) is a blockchain token with its own unique ID, used to show who owns a specific digital or physical item. Bitcoin, ETH and stablecoins are fungible: any one unit can be swapped for another of equal value. NFTs are not. Each token is a separate record, even when thousands belong to the same collection.

NFTs are used for digital art, collectibles, in-game items, virtual land, event tickets, domain names (such as ENS names) and, more and more, tokenized claims on real-world assets. The main question for a buyer is what the token actually gives you, and how easily you can sell it later.

How NFTs work

An NFT is created ("minted") by a smart contract. On Ethereum and EVM-compatible chains such as Polygon, BNB Smart Chain, Base and Arbitrum, the common standards are ERC-721 (one token per ID) and ERC-1155 (one contract can hold both unique and semi-fungible items, such as 500 copies of a game sword). Solana uses its own token programs and the Metaplex standard. Bitcoin has Ordinals, which write data directly onto individual satoshis.

The token itself usually holds an ID, an owner address and a link to metadata: name, description, traits and the image or media file. The blockchain keeps a public, permanent record of every transfer, so anyone can check who holds a token and where it came from.

Where that metadata lives matters a lot:

Why NFTs matter and when you need one

NFTs give digital items scarcity you can check and ownership you can transfer without asking a platform for permission. Creators can sell directly to buyers. Games and apps can let users trade items outside the original store. Tickets and memberships can be checked on-chain.

You deal with NFTs if you collect or trade digital art, play blockchain games, hold ENS or similar domains, use token-gated communities, or invest in tokenized assets that are issued as NFTs. To hold them you need a wallet that supports the right chain, often a Web3 wallet, or an exchange or marketplace account that stores them for you.

Limits and risks

• Ownership of the token is not ownership of the content. Buying an NFT does not transfer copyright unless the project's licence says so. Many licences give only personal use rights.
• Royalties are not guaranteed. Smart contracts can signal a royalty, but many marketplaces now make creator royalties optional or apply them only to some collections.
• Liquidity is thin. Every NFT is unique, so there may be no buyer at the price you want. "Floor prices" can fall fast, and the market has dropped well below its 2021 to 2022 peak.
• Scams and wallet drainers. Fake mint sites, phishing links and malicious approval requests are common. Signing the wrong transaction can empty a wallet.
• Custody risk. NFTs held on a centralized exchange depend on that platform. Several large exchanges have scaled back or closed their NFT marketplaces, which forced users to withdraw tokens to their own wallets.
• Fees and tax. Gas fees on busy chains can be higher than the item's price. In many countries, selling or swapping an NFT is a taxable event.

What to check when comparing NFT platforms

• Chains supported: Ethereum, Solana, Bitcoin Ordinals, Polygon, Base and others. Your NFT must be on a chain the platform handles.
• Custody: whether you hold the keys (self-custody wallet) or the platform holds the NFT for you, and whether you can withdraw to an external wallet.
• Fees: marketplace fee per sale (often 0% to 2.5%), creator royalties, gas, and deposit or withdrawal fees.
• Payment options: crypto only, or also card and fiat purchases, plus any KYC required.
• Safety tools: verified collection badges, spam filtering, transaction previews and alerts on risky approvals.
• Status of the service: whether the marketplace is still actively maintained, since NFT products are often shut down or merged into other apps.

Related terms

• NFT vs fungible token: fungible tokens (BTC, USDT, ERC-20 tokens) are identical and divisible. NFTs are unique and usually indivisible, although fractional NFT projects split ownership into fungible shares.
• NFT vs RWA token: a real-world asset token represents a claim on something physical or financial. It can be an NFT or a fungible token. Its value depends on the legal agreement behind it, not on the blockchain.
• Mint vs buy: minting creates a new token from the contract. Buying acquires an existing one from another holder on the secondary market.