What is an NFT and How Does It Work?

The NFT, or Non-Fungible Token, is one of the hottest technological trends of recent years, exploding into the world of cryptocurrencies and blockchain technology. But what exactly is an NFT, and why is everyone talking about it? This article explains the essence of NFTs, how they work, and why they have become so popular in a simple and understandable way.

What is an NFT?
An NFT is a unique digital asset stored on a blockchain. "Non-fungible" means that each NFT is one-of-a-kind and cannot be directly exchanged for another NFT, unlike Bitcoin, for example, where one BTC is always worth the same as another BTC. NFTs are most commonly used to represent digital artwork, collectibles, virtual real estate, or even music creations.

Example:
A painting like the Mona Lisa is unique and non-fungible. If a digital artwork’s ownership is verified by an NFT, it is also unique and cannot be replicated in the same way.

How Does an NFT Work?
NFTs are built on blockchain technology, most often on the Ethereum blockchain, though other platforms like Solana or Polygon also support them. A blockchain is a decentralized, public database that transparently records transactions.

Steps of How NFTs Work:

  1. Creation (Minting): An artist or creator uploads a digital file (e.g., an image, video, or music) to an NFT marketplace, such as OpenSea, and "mints" the NFT. This process links the file to a unique token stored on the blockchain.
  2. Ownership Verification: The NFT records the owner on the blockchain, and this cannot be falsified since transactions are public and verifiable.
  3. Buying and Selling: NFTs can be bought or sold on marketplaces using cryptocurrencies, such as Ether (ETH). Transactions are recorded on the blockchain, so everyone can see who owns a given NFT.
  4. Use Cases: NFTs can serve various purposes, such as collecting digital art, purchasing virtual land (e.g., in Decentraland), or participating in games (e.g., Axie Infinity).

Why Are NFTs Popular?
There are several reasons for the popularity of NFTs:

  • Uniqueness and Ownership: NFTs enable clear proof of ownership for digital assets, which was previously challenging in the digital world.
  • Supporting Artists: Creators can sell their work directly and often receive a percentage of future sales (known as "royalties").
  • Investment Opportunity: Many buy NFTs for speculative purposes, hoping their value will increase.
  • Community Experience: NFT projects often build strong communities, where owners gain access to exclusive benefits.

Examples of Famous NFTs

  • Beeple – EVERDAYS: THE FIRST 5000 DAYS: A digital artwork sold for $69 million in 2021.
  • CryptoPunks: A collection of 10,000 unique pixel-art characters, some of which have sold for millions of dollars.
  • Bored Ape Yacht Club: A popular NFT collection offering exclusive community membership and benefits to owners.

Challenges and Criticisms
NFTs are not without controversies:

  • Environmental Impact: The energy-intensive nature of the Ethereum blockchain has raised environmental concerns about NFT creation and trading. (Note: Ethereum’s 2022 "Merge" update significantly reduced energy consumption.)
  • Market Risks: The NFT market is volatile, and many NFTs may become worthless.
  • Legal Disputes: Copyright and ownership issues related to NFTs are not yet fully resolved.

The Future
NFT technology is still in its early stages, but it is already being applied in various fields, from art and gaming to real estate. In the future, NFTs are likely to expand further, potentially in areas like digital identity, ticketing, or verifying ownership of physical objects.


NFTs offer revolutionary possibilities for digital ownership and direct support for creators. While the technology faces challenges, the world of NFTs is an exciting and rapidly evolving space that could fundamentally change how we think about digital assets. If you’re interested in NFTs, it’s worth researching thoroughly before investing, as the market is thrilling but risky!