Blockchain 101: What is an NFT?
The only guide you'll ever need to truly understand Non-Fungible Tokens once and for all. Plain English, no jargon.
The only guide you'll ever need to truly understand Non-Fungible Tokens once and for all. Plain English, no jargon.
SMooTH
Posted on May 1, 2025
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Well, well, well.
Look who’s back! Not tired of learning yet, are we? That’s what I like to see!
Welcome back to Blockchain 101, friend.
So far, we've covered the building blocks of crypto — blockchains, Bitcoin vs Ethereum wallets, and smart contracts (you’ll find links to all of these at the end of the article).
Today, we're finally cracking open the most famous, hyped, and misunderstood use case of them all: NFTs.
No doubt you’ve heard of them. But do you really know what they are?
You might have seen headlines about NFTs selling for millions, or memes about "right-click saving" digital art, or about NFTs “finally” being “totally worthless”.
But NFTs are much more than what you see on the surface — they're a foundational piece of the decentralized internet we're building.
And digital art is just one of its many use cases.
In this article, we'll break down what NFTs really are, how they work, why they matter, and why you shouldn’t blindly believe headlines spawned by reporters who write for clicks.
As always: no jargon. Just plain English.
Let’s dive in. 🤿
1️⃣ What’s an NFT, Really?
OK, basics first.
NFT stands for Non-Fungible Token.
Let’s break that down:
- Token = a digital asset recorded on a blockchain.
- Non-Fungible = one-of-a-kind, not interchangeable.
- If something is fungible, every unit is the same. You can swap them, and no one would care. They're identical in value.
- If something is non-fungible, it’s unique. You can’t just swap it with any other item. Each one has its own distinct value.
Let’s look at some practical examples:
Fungible | Non-Fungible |
A $10 bill = any $10 bill is the same as another. | A $10 bill signed by a celebrity = unique, collectible, different value. |
A carton of eggs from the supermarket, any carton will do. | A hand-painted Easter egg from a famous artist = unique, valuable. |
A brand-new Rolex Submariner bought from the store = identical to other new Submariners. | A vintage Rolex with a rare misprint or historical significance = one of a kind. |
Owning an NFT means you have a unique digital item certified on a blockchain. It’s like a digital certificate of ownership — proving that you own the original, not just a copy.
Important: The NFT is not what you see on the surface.
It’s the ownership record of that thing. For instance, this image shows one of the 10,000 CryptoPunks created in 2017.
While the image on its own can easily be reproduced and used for other NFTs, the NFT itself cannot.
The actual NFT is.. well, it’s a bunch of code living on the blockchain.
Imagine it like this:
- You see a pretty painting in a gallery. 🎨
- But the deed proving ownership? That’s locked in a vault. 📜
The NFT is that digital deed. It's made of code, created and managed by a smart contract.
That code says things like:
- Who created it
- What digital item it points to (through metadata - more on that below)
- Who owns it right now
- What special rules it follows (like automatic royalties)
So when you buy an NFT, you’re not just buying the visual file — you’re buying a tokenized proof that you own it.
And that proof is secured by the blockchain, tamper-resistant, and publicly verifiable. NFTs use smart contracts to define, track, and enforce this uniqueness.
The ERC-standard
On Ethereum, NFTs are built using different ERC standards (Ethereum Request for Comments = technical blueprint).
- ERC-721: The original NFT standard. Each token is 100% unique. Used for early collections like CryptoKitties and Bored Apes.
- ERC-1155: A more advanced standard that lets one contract create both fungible and non-fungible tokens. Useful for games where you might have 1,000 identical swords (fungible) and a one-of-a-kind dragon egg (non-fungible).
Fun fact
Builders are now working on ways to verify digital ownership instantly.
With simple methods like QR scans, it’s now possible to scan an image and check if it’s tied to a real blockchain-certified NFT — helping distinguish originals from copies. Here’s a quick demo in action.
2️⃣ How NFTs Actually Work
If we want to understand how NFTs work, we need to look at how they are created first.
✨ Minting
NFTs are "born" through a process called minting.
It’s just a fancy way of saying you publish a new token onto a blockchain.
When you mint:
- You create a new entry on the blockchain
- The smart contract assigns it to your wallet
- You usually pay a small network fee (called gas)
🧩 Metadata
The NFT itself doesn’t store giant image/video files on the blockchain.
Instead, it stores metadata — basically info about the digital asset, like:
- Title
- Description
- Creator
- Link to the actual file (often on IPFS or another storage service)
In most cases, the NFT points to the asset — it doesn’t contain the asset.
Did you know?
The images for CryptoPunks were originally hosted off-chain like most early NFTs — but in 2022, they were upgraded to store their entire pixel art and metadata fully on-chain. That means the images live directly on the Ethereum blockchain itself — no external links, no IPFS, no dependencies. A pure NFT.
💼 Ownership
Once minted, ownership is recorded forever.
When you sell or transfer an NFT:
- The smart contract updates the owner’s address
- The blockchain shows the full ownership history (=provenance)
And as everything happens on the blockchain, there are no middlemen, and it’s all public and provable.
So… how do they “work”? Well, quite simply they work as irrefutable proof of ownership for a specific asset.
And while art is the most obvious example of an “asset”, it’s far from being the only one!
3️⃣ NFT Asset Classes
As an NFT is nothing more than proof of ownership, it can basically represent anything that’s unique, digital or physical.
Here are the most common applications:
🎨 Digital art
- Generative art
- 3D art
- Paintings
- Photos, ..
🎮 Gaming items
- Weapons
- Avatars
- Skins
- Wearables, ..
👤 Digital identity
- Profile pictures
- Certifications
- Credentials
- Domain names
- Personal wallets
- Community, ..
📜 Memberships / Access
- VIP passes
- Token-gated communities
- Yearly memberships
- Celebrity access
- Private group access, ..
🎟️ Event tickets
- Web3 conferences
- Concerts
- Sports events
- Galas
- Dinners, ..
🏡 Real World Assets (RWA)
- Collectibles
- Merch
- Real estate
- Luxury items, ..
Bottom line?
NFTs aren’t just pictures — they’re a technology for owning things online.
But why not just stick with traditional ownership methods that already work?
Great question.
4️⃣ Why NFTs Are Useful
For the sake of clarity, let us compare both ways of ownership in a good old table format.
Feature | Traditional Ownership | NFTs (Digital Ownership) |
Proof of Ownership | Centralized, often needs a third party (e.g. notary, registry) to verify | Publicly verifiable on-chain, with zero intermediaries |
Scarcity | Needs physical inspection, certificates can be faked or lost | Scarcity coded in smart contracts — provable and tamper-proof |
Portability | Tied to paper documents, platforms, or jurisdictions | Portable across apps, games, marketplaces — just need a wallet |
Royalties | Hard to enforce resale royalties (especially in art, music) | Automatically paid to creators via smart contract logic |
Interoperability | Each system/platform has its own isolated rules and formats | Standardized tokens (like ERC-721) work across any compatible system |
Permissionless Selling | Often requires brokers, auction houses, or licenses | Anyone can list/sell NFTs on open marketplaces without needing approval |
Transparency | Ownership and transaction history often hidden or difficult to access | Full public history recorded on the blockchain |
And that’s not all NFTs offer. Seamless integration, 24/7 global market access, programmability, self-custody,..
The list of goes on.
5️⃣ Conclusion
NFTs aren’t just memes or overpriced pictures (sometimes they are just that though).
They’re a new primitive — a way to own, trade, and build with unique digital assets.
Time to recap!
- NFTs = Non-Fungible Tokens = unique digital items recorded on a blockchain.
- Minting = publishing a new NFT via smart contracts.
- Metadata = what ties the NFT to the actual file (image, song, etc.).
- Ownership = publicly verifiable, secure, and permanent.
- Use cases = art, games, memberships, RWA, identity, and more.
NFTs are a tool — what really matters is how you use them.
Enjoyed the ride?
Subscribe for more noob-friendly Blockchain 101 guides, and unlock the exciting Web3 world one step at a time!
More deep dives coming soon. 🫡
Author
SMooTH
@thisissmooth
🐍 Confident Cobra 📢 Communication is my passion 🔎 Research at Pluid 🦉 Ambassador at DYLI 👍
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