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Non-Fungible Token (NFT)

An NFT (non-fungible token) is a unique digital asset that represents ownership of a specific item, piece of content, or access right on a blockchain. Unlike cryptocurrencies such as ETH or BTC, which are fungible and interchangeable, each NFT is distinct and cannot be replicated or divided. NFTs are typically used to represent digital art, collectibles, music, in-game assets, and more.

NFTs are powered by smart contracts on blockchains like Ethereum, Polygon, Solana, and others. They are most commonly built using token standards like ERC-721 or ERC-1155, which define how ownership and metadata are handled.

How NFTs Work

  1. Token Creation (Minting) – NFTs are created via smart contracts that assign a unique ID and metadata to each token.
  2. Ownership Tracking – The blockchain records all transfers, making the ownership history fully transparent.
  3. Metadata Association – The token contains or links to metadata (e.g., image, video, or file reference).
  4. Storage and Access – While the token lives on-chain, the digital content is often stored off-chain via IPFS or similar systems.
  5. Trading and Interaction – NFTs can be bought, sold, or used on marketplaces like OpenSea, Blur, or within dApps and games.

Key Features

  • Non-Fungibility – Each NFT is unique, distinguishable by its ID and metadata.
  • Verifiable Ownership – The blockchain provides a public, immutable proof of ownership.
  • Programmability – Smart contracts enable royalties, unlockables, and access rights.
  • Interoperability – NFTs can be used across multiple platforms, wallets, and marketplaces.
  • Scarcity Enforcement – Projects can cap supply, ensuring rarity and exclusivity.

Benefits of NFTs

  • Creator Empowerment – Artists and creators can monetize work directly without intermediaries.
  • Global Accessibility – Anyone with an internet connection can mint, buy, or sell NFTs.
  • Transparency and Provenance – Full transaction and ownership history is publicly viewable.
  • New Monetization Models – NFTs enable digital ownership, subscriptions, gated access, and more.
  • Resale Royalties – Some NFTs automatically pay royalties to creators on secondary sales.

Use Cases of NFTs

  1. Digital Art – Artists mint unique artworks as NFTs and sell them on platforms like Foundation.
  2. Collectibles – Projects like CryptoPunks or Bored Ape Yacht Club create scarce digital items.
  3. Gaming Assets – Games like Axie Infinity and Gods Unchained use NFTs for in-game items and characters.
  4. Music and Media – Musicians release tracks or albums as NFTs, sometimes with exclusive perks.
  5. Event Tickets – NFTs are used to issue tamper-proof, tradable digital tickets for concerts and conferences.
  6. Identity and Access – NFTs grant access to DAOs, gated content, or metaverse experiences.

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