What are NFTs

What Are NFTs And How Do They Work? NFT Explained

Recently, you might have heard the term NFT (Non-Fungible Token). The art and entertainment industry is making the most use of it. Communities are helping artists to make the most out of their art and creativity with the help of NFTs.

Artists and NFT owners are using this technology for better control over their creativity and art as the idea of blockchain-based technology is picking up steam. Moreover, the global NFT market is valued at more than 15 billion USD.

What Are Non-Fungible Tokens?

Digital tokens, known as NFTs, are monetary securities with data written in blockchain technology. It includes data like images, videos, games, GIFs, audio, etc. These digital tokens can not be manipulated or changed once converted to NFTs.

Smart contracts power non-fungible tokens. These tokens can not be copied as every NFT has a unique identity, and blockchain-based tokens do not allow it.

Fungible Vs. Non-Fungible Tokens

Non-fungible means a unique and not-replaceable thing. Physical and digital currencies can be exchanged, but NFT can only be traded.

In simple terms, properties decide the NFTs, while fungible tokens can be traded for similar fungible tokens. For example, a bitcoin can be exchanged for a bitcoin, which will have the same value. The NFT exchange is not possible as every NFT contains a different value and unique identity.

Non-fungible tokens are not interchangeable, and each of them represents assets or art owned by a particular owner. Contrastingly, Fungible tokens are interchangeable and can be divided into smaller units or parts to form the same value. 

For example, a 100 Dollar bill can be divided into smaller units to bring the same value. Still, art can not be divided into smaller units or copied to bring the same value and authenticity. Non-fungible tokens are easily distinguishable and contain every transaction, seller, and buyer information. A unique blockchain-based digital certificate helps in keeping the collectibles unique. 

How is NFT different from today’s art?

NFT is different from today’s art in many ways. Here are some key points:

  • NFT contains unique digital data, and this one-of-a-kind file can not be copied. The copy of any music file or image is the same as the original one.
  • The owner of any NFT can be verified, as it can not be changed. The owner of any data today can be changed, and it is not easy to find the original creator of the file or art.
  • Content creators can sell their NFTs in the global market, and infrastructure and distribution platforms have no limitations or boundaries.

How Do NFTs Work?

NFTs are replacing physical art files with digital collectibles. These tokens have values stored in them. The creator of the NFT can set the value of the art and place it in the market as NFT. Unique data makes it easy to validate ownership.

A non-fungible token represents digital objects with the help of blockchain. Here is the process of how an NFT works:

The ownership of an NFT is limited to one owner at a time, and it is controlled and managed with the help of a unique ID. This data can not be copied or forged. NFTs are transferred with codes in smart contracts. The process of minting an NFT has validating information and keeping it in a block.

How owners can claim an NFT:

A private key is generated with every NFT, and when a user purchases an NFT, a unique private key is given with the help of a public address. A signed message can also be used to prove the identity.

The owner of an NFT can be identified and tracked easily without the help of third-party involvement. It helps find the authenticity of the art that is being sold in the digital space.

When a user creates an NFT without anyone’s involvement in digital markets, the owner of an NFT can sell or trade it. An NFT owner can earn royalties every time it is sold.

The owner of an NFT can be tracked and easily found without the help of third parties. It helps find the realness and authenticity of the art being sold or traded in the digital market.

NFT Vs. Cryptocurrencies

Cryptocurrencies are fungible, and NFTs are uniquely identifiable digital properties. Both NFT and cryptocurrencies are based on blockchain technology with similar standards.

Cryptocurrency purchases or trades NFTs, but NFTs can not be used to trade cryptocurrency. The value of cryptocurrency is economical and directly related to monetary while the NFT is related to monetary and non-monetary value. The creator of the NFT can use it to distribute or autograph the art.

Cryptocurrencies are decentralized networks that can not be manipulated or interfered with by any governing body or government. The value of every cryptocurrency token is the same, but the value of every non-fungible token is not the same.

A ledger in a blockchain has an immense number of data blocks. When a new block is created, it gets verified at every node on the network, and then the transaction blockchain gets authorized and completed.

Why is NFT Becoming So Popular?

Non-fungible tokens are getting more popular these days as in the metadata of the NFT; an artist can include the signature and give a personal connection to the fans. With digital space getting bigger, it is also called the investment of the future.

Almost every genre, big brand, and some popular celebrities are joining the NFT space, making it the best place for fans to buy and keep digital art.

Current taxation, trading, and loan systems keep it secure, and it is becoming more popular every day. It is authentic and the next step in the infrastructure of how art is managed.

One of the main reasons is that the identity of the art remains the same throughout, but the owner might change. There is no intermediate, which is also one reason it is preferred over the physical market.

What Are NFTs Used For?

Content creators and artists use NFTs to monetize their work while keeping the ownership forever. Artists should not rely on other streaming service platforms or art galleries for auctions of their created art.

The ease of selling and trading without government interference is why NFTs are used more often. Artists will receive an amount in the form of a fixed percentage called royalties on every transaction in the future whenever their art is resold.

NFTs can manage crypto transactions and keep the art in digital form forever with the same owner identity.

How Does NFT Make Money?

The creator of NFT makes money by selling or trading the tokens. The original creator can also make money by setting a percentage for every time it is sold in the future in royalties. Many brands use NFT artworks for charity.

An artist or creator of the NFT can use the auction method or directly put a price on a non-fungible token to sell. It gives users a chance to become the owner of unique items in the virtual world, and they can keep making money on every further sale.

How Are NFTs Created? / How To Create An NFT?

Questions like how to create an NFT and how you can make a profit from an NFT might come to your mind. Here is the complete step-by-step guide for making NFT:

To create an NFT, the first thing that needs to be done is choosing digital artwork. Once the process of an artwork that needs to be minted into NFT is done, a user should select the best blockchain technology. Blockchain technology is the base of the development of NFTs, and it should be selected by keeping the aspects like process, effects on climate, longevity, etc.

After that, a user needs to set up a digital crypto wallet for cryptocurrency transactions. This wallet is useful for paying and trading non-fungible tokens. Once the user is done with the wallet, the next process is choosing a reliable NFT marketplace. The marketplace helps in selling and trading. The digital art file that needs to be minted is uploaded to this marketplace, and the minting process is initiated here. With this, the NFT is ready to be sold or auctioned.

Examples Of NFT

Almost every form of digital art can be minted into an NFT. Blockchain-supported digital arts are being traded at very high prices.

Here are the type of art items that are currently sold and are good NFT art examples:

  • Images
  • GIFs
  • Videos
  • Audios
  • Designs
  • Event tickets
  • Banners
  • Essays
  • Documents
  • Virtual Avatars
  • Domain names
  • Video Games
  • Tweets

Here are some of the top revenue-generating non-fungible tokens examples:

  • Twitter co-founder Jack Dorsey sold his first tweet for almost 3 million USD.
  • A GIF named Nyan Cat sold for 600,000 USD
  • LeBron James highlights sold for 200,000 USD.
  • Beeple’s Everyday: the first 5000 days sold for 69 Million USD.

How To Buy Or Invest In NFTs?

If you are wondering how to buy an NFT, here is the complete process of buying an NFT and adding it to your NFT collection.

The first thing you need to do is to own a digital wallet. You can own a wallet from various platforms to store your cryptocurrency/ digital currency. There are several marketplaces for NFT distribution and trading; you can choose one from them and complete your first NFT purchase or trading.

Here are the top marketplaces for performing trading or investing in NFTs:

NFT Marketplaces

NFT art marketplace is where a user can buy the digital form of non-fungible art. The trading of any NFT is done in a decentralized manner.

The market for NFT is of two types, open and exclusive. The open marketplace is for every type of art created by anybody, but the exclusive is based on a particular category or community.

NFT markets make money by charging for every transaction on trading and transactions. There are plenty of shops to shop NFTs from; here are the top ten most used and trusted NFT marketplaces:


This network is the global leader in NFTs transactions. A buyer can find everything on this platform, from digital cards to art. It accepts more than 150 payment tokens, which is why it is widely used.

With the help of the minting tool of OpenSea, artworks can also be created in the blockchain. It helps sell an item at a fixed price, create a declining listing, or make an auction listing.


Artists or creators can refer and invite other artists on this platform. This invite-first platform is in a network on Ethereum. Mostly, 3D art and videos are traded on this network.


It is a marketplace that has images, videos, gifs, etc. The collector can only purchase art with the help of Ethereum from this platform. NFTs minted or available on this platform can be sold on the OpenSea platform.


This marketplace for NFTs is based on community, and users can mint and trade NFTs very well. It supports Flow, Tezos, and Ethereum networks.

Axie Infinity

This marketplace works on games that are created with NFT. Online players can mint, trade, and buy NFT games from this network.


This polygon blockchain exclusively has art from famous artists, brands, and celebrities. This marketplace of digital assets is listed for sale, and the translation fee is also very affordable on this platform.

Myth Market

It is a series of online marketplaces with digital trading card brands. It supports WAX and supports digital trading cards.

Bakery Swap

This is available on Binance Smart Chain (BSC) and uses a BAKE token for transactions. You can also mint artwork on this network, as it offers several decentralized finance services.


It is an NFT marketplace with artists that can easily sell and purchase art. Global artists connected on this platform, making it easy for transactions.

NBA Top Shot Marketplace

It is a Flow NFT marketplace based solely on NBA moments and highlights. NBA and WNBA can get creative content in the form of NFT from this platform.

Why NFTs are part of the controversy 

There is a lot of speculation that it is unhealthy for the environment to mint a non-fungible token as it affects the climate. The computing power and electricity used in the blockchain are huge, which is the reason behind the controversy of NFT.

Blockchain technologies are used to keep the system secure, which is why there will be some climate-related issues. Blockchain networks are trying to make this technology environment-friendly and working on unexplored aspects to save energy and limit the losses to a bare minimum.

Future Of NFT

Due to the huge impact of NFT on the metaverse, experts suggest that these tokens will be used more frequently in the future. Artists all over the globe are using the NFT, and the wave of NFT is not showing any signs of slowing down.

Any artist or creator need not depend on any big media house or major publications for their artwork. They can sell and trade art in NFT directly to the customer.

The future is uncertain, but there are favorable chances that NFTs are here to stay as demand is the only factor that can be considered, as only it can decide what a user wants to pay for a particular piece of art.

You can invest in NFT by doing proper research while considering all the possible risk factors. The drop in sales can be seen in recent times, but many big names are joining the NFT market, and the boom in the NFT sector is not slowing down anytime soon.

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