What are NFTs?

If anyone can save an image, what exactly does the person holding its NFT own? To understand it, think of a signed trading card: photos of it may be everywhere, but owning that specific card is something else.

“Non-fungible” doesn’t mean it can’t be sold or transferred. It means it isn’t equivalent to and interchangeable with any other token of the same type. One euro can be swapped for another euro. Two trading cards, even if they look alike, can have a different identity, history and value.

Creating an NFT is called minting. On networks such as Ethereum, a smart contract records the token’s identifier and the address that holds it. Standards such as ERC-721 define the rules for how it works and is transferred. When it changes hands, that record on the blockchain is updated.

The image, video or other elements of the NFT aren’t necessarily stored on the blockchain itself. Often the token points to a file located elsewhere, for example on a server or on IPFS, a distributed file storage system.

Why it matters

NFTs can be used for digital collectibles, in-game items, tickets or access to services. The blockchain lets us check the recorded ownership and transfer history without relying solely on a platform’s database.

We find this capability useful, but its practical value depends on the application. An in-game item doesn’t automatically work in another game because it is an NFT, nor does a digital ticket guarantee that the organizer will keep its promise.

What to watch out for

Owning the NFT doesn’t automatically transfer copyright. The right to reproduce or commercially use the work depends on the relevant terms. Also, the record on the blockchain doesn’t by itself prove that the token’s creator had permission to use the work.

There are also fake collections, malicious signature requests seeking access to your wallet, and files that may stop being available. Uniqueness doesn’t guarantee demand: an NFT may find no buyer, regardless of the price a platform displays.