NFTs are digital tokens with a unique identity on a blockchain, which can be linked to an image, a collectible or an access right. The name stands for non-fungible tokens: they are not interchangeable units like euros. Owning an NFT does not automatically give you the copyright to the work attached to it.
What does “non-fungible” mean?
The term is confusing, because NFTs can be sold and transferred just fine. “Non-fungible” here means that one token cannot be swapped for any other as if they were exactly the same thing.
Think of a one-euro coin. When you pay, you usually don’t care which specific coin you hand over, since units of the same face value are equivalent. By contrast, two tickets to the same concert may be for different seats and not offer the same experience.
An NFT is more like the second example. It has a distinct identity within a specific smart contract, even if its image looks like others or is identical to them. Technical uniqueness, of course, guarantees neither artistic originality nor financial value.
How NFTs work on the blockchain
A blockchain is a shared digital ledger in which transactions are recorded. A smart contract, that is, code that runs on the network, defines how the NFT is created and how it is transferred. Ethereum, for example, can run such contracts.
At creation, known as minting, the token is recorded and assigned to a wallet address. Its history lets us track its transfers on that particular network. It does not necessarily reveal the real identity of each holder.
Where is the image?
Often the file itself is not stored on the blockchain. The token points to metadata, that is, information such as the title, description and location of the image. This may sit on an ordinary server or on a distributed storage system such as IPFS.
Here lies a real trap: the token’s lifespan does not guarantee the file’s availability. If its hosting stops, the record may remain but the image may not load. Also, some contracts allow the metadata to be changed.
What is the difference between NFTs and cryptocurrencies?
NFTs and cryptocurrencies use related infrastructure, but they don’t necessarily serve the same purpose. Units of the same cryptocurrency, such as ETH, are usually treated as equivalent. NFTs are identified individually.
An NFT may be priced in a cryptocurrency, while creating or transferring it may require network fees (gas fees). These are separate from a platform’s commission. Some services also accept card payments, without this changing the nature of the token.
What do you actually get with an NFT?
You get control of the token, according to the rules of the contract and the way it is stored. What else comes with that ownership depends on the creator’s terms: it may be personal use of an image, access to a community or a specific commercial license.
The token, the digital file and the copyright are different things. Buying a painting doesn’t automatically give you the right to print it on T-shirts. Likewise, buying the NFT of an image doesn’t automatically transfer the rights to exploit it.
“So why not just take a screenshot?” You can copy the image, but that doesn’t move the token into your wallet. On the other hand, the token doesn’t technically stop anyone else from copying the file.
Nor does it prove on its own that the issuer is the legitimate creator. Someone can issue an NFT linked to another person’s work without permission. The blockchain records the issuance; it doesn’t check whether the issuer had the right to do it.
Where are NFTs used?
Digital art and collectibles are their best-known uses. An artist can link a work to specific tokens and set the terms on which they are offered. However, their royalties from resales are not guaranteed on every marketplace and transfer route.
Profile pictures and communities
PFP NFTs, short for profile picture, are collections often used as profile pictures. They may come with access to communities or events. These perks depend on the team and the project’s terms, not just on the existence of the token.
Games, tickets and certificates
In games, an NFT can represent an item or a character. That doesn’t mean it will work in any other game, or that it will stay useful if the service shuts down. Moving it between apps requires cooperation and technical support.
There are also potential applications in tickets, memberships and certificates. Their usefulness depends on whether the organizer or issuer recognizes them. Similarly, an NFT linked to real estate does not on its own replace the legal title deed.
How is an NFT created?
Creating NFTs is not limited to companies. A creator can use a suitable platform or their own contract. The usual process includes the following:
- Choosing a work or perk and checking that you hold the necessary rights.
- Choosing a network, a wallet and a minting method.
- Preparing the file, the metadata and the terms of use.
- Minting the token and covering any fees.
- Checking the listing and, if you wish, offering it on a marketplace.
On some services minting is deferred until a later action, such as the first purchase. That doesn’t necessarily mean zero cost. Creating an NFT doesn’t automatically create demand, nor does it prove the work’s authenticity.
Where can you find NFTs?
Platforms such as OpenSea and Rarible are used to browse collections and trade, while SuperRare focuses on digital art. Each service’s supported networks, fees and features can change.
Creators also showcase work on social media and in their communities. But an ad or a message doesn’t prove authenticity. You need to verify the official collection and the contract address, not just recognize the name or the image.
Value, risks and common scams
An NFT’s price can be influenced by its creator, its utility, its provenance and a community’s interest. Rarity alone is not enough. In any case, we consider the distinction between the price a seller asks and the price someone is willing to pay to be crucial.
Liquidity can be very limited: even if a high previous sale is displayed, there is no guarantee of a next buyer. At the same time, there are technical risks, storage problems and dependence on teams that may abandon the project.
- Wash trading: transfers between wallets controlled by the same person or by collaborators, to make activity look bigger.
- Pump and dump: generating hype so that early holders can sell.
- Fake collections: copies of the works or names of well-known creators.
- Phishing: fake pages and signature requests that can lead to the loss of your assets.
Never give your seed phrase (recovery phrase) to a platform or so-called support. Connecting a wallet, signing a message and approving a transfer are not the same thing. A “free NFT” can end up costing you dearly.
What applies to users in Greece?
The EU’s MiCA regulation does not automatically cover every NFT. Crypto-assets that are genuinely unique and non-fungible are excluded from its scope, but the “NFT” label alone is not enough for the exemption. Issuance in a large series or collection may indicate fungibility, and the actual characteristics are examined.
Being exempt from MiCA does not mean being exempt from every other law or tax obligation. A tax assessment in Greece requires a suitable professional to examine the activity and the facts. Useful records include your transaction history, commissions, receipts and the corresponding value in euros.
Our view
We think NFTs are interesting when they solve a specific problem: recording provenance, transferring a digital perk or managing access. The hard part is keeping the content, the rights and the service that supposedly come with them available.
The record on the blockchain can be verified. A team’s promise to build something useful remains a promise. We consider this difference more important than any impressive number shown next to an image.
Frequently asked questions
What is an NFT, with an example?
It is a distinct digital token on a blockchain. It may, for example, be linked to a digital artwork, without owning it automatically transferring the copyright.
Are NFTs cryptocurrencies?
They are crypto-assets, but they don’t work like the equivalent units of an ordinary cryptocurrency. Each NFT is identified individually and can represent different content or a different right.
Can someone copy my NFT?
They can copy the linked image or mint another token with the same image. That doesn’t give them control of your token, nor does it create the same record in the same contract.
Does every NFT have value?
No. A unique identity doesn’t guarantee demand, utility or the ability to resell. A displayed price is no proof that a buyer is available.
Can I create an NFT for free?
Some services let you create one without an upfront fee or defer the minting. However, network fees or commissions may come up later, depending on the platform and the action.