Table of Contents
What Are NFTs?
NFT stands for Non-Fungible Token. It's a unique digital certificate of ownership stored on a blockchain that proves you own a specific digital (or physical) item.
Breaking Down the Term
- Non-Fungible: Unique and not interchangeable. Unlike Bitcoin (fungible - one BTC = another BTC), each NFT is one-of-a-kind
- Token: A digital asset on a blockchain
Fungible vs Non-Fungible
Fungible (Interchangeable)
- Money: One $10 bill = another $10 bill
- Bitcoin: 1 BTC = 1 BTC (identical value)
- Gold: 1 oz of gold = 1 oz of gold
Non-Fungible (Unique)
- Real Estate: Each house is unique
- Art: Original Mona Lisa vs a copy
- Concert Tickets: Seat 5A ≠ Seat 10B
- NFTs: Each token is unique
How NFTs Work
The Technology Behind NFTs
Creation (Minting)
An NFT is "minted" - created on a blockchain (usually Ethereum) with unique metadata
Smart Contract
A smart contract defines the NFT's properties, ownership rules, and royalties
Blockchain Storage
Ownership record is stored permanently on the blockchain (immutable)
Transfer
NFTs can be bought, sold, or transferred - blockchain updates ownership
What's Actually Stored?
Common Misconception: The image/video itself is NOT stored on the blockchain (too expensive)
Reality: The NFT contains:
- Token ID: Unique identifier
- Contract Address: Which smart contract created it
- Metadata: Name, description, properties
- Link: URL to the actual file (often on IPFS - decentralized storage)
- Owner Address: Current owner's wallet
NFT Standards
- ERC-721: Standard for unique NFTs (most common)
- ERC-1155: Semi-fungible tokens (e.g., 100 copies of same NFT)
- Other Chains: Solana (SPL), Flow, Tezos have their own standards
Why Are NFTs Valuable?
The question everyone asks: "Why would someone pay millions for a JPEG I can right-click and save?"
Sources of NFT Value
1. Provable Ownership
You can prove you own the original, not just a copy. Like owning the original Mona Lisa vs a poster.
2. Scarcity
Limited supply creates value. If only 10,000 exist and demand is high, prices rise.
3. Creator Reputation
Art by famous artists (Beeple, Pak) commands higher prices, just like traditional art.
4. Community & Status
Owning certain NFTs grants access to exclusive communities (e.g., Bored Ape Yacht Club).
5. Utility
Some NFTs provide real benefits:
- Access to events or content
- In-game items with functionality
- Voting rights in DAOs
- Revenue sharing
6. Speculation
Many buy NFTs hoping to resell at higher prices (like any collectible market).
Famous NFT Sales
- Beeple's "Everydays": $69 million (Christie's auction, 2021)
- CryptoPunk #5822: $23.7 million (2022)
- Bored Ape #8817: $3.4 million (2021)
- Jack Dorsey's First Tweet: $2.9 million (2021)
NFT Use Cases
NFTs go far beyond digital art:
1. Digital Art & Collectibles
Examples: CryptoPunks, Bored Ape Yacht Club, Art Blocks
Value: Artists earn directly, get royalties on resales, reach global audience
2. Gaming
Use: In-game items (skins, weapons, characters) as NFTs
Benefit: True ownership - you can sell or trade items outside the game
Examples: Axie Infinity, Gods Unchained, The Sandbox
3. Music & Entertainment
Use: Songs, albums, concert tickets as NFTs
Benefit: Artists bypass record labels, fans get exclusive content
Examples: Kings of Leon album, 3LAU music NFTs
4. Real Estate & Virtual Land
Use: Virtual land in metaverses, or real property deeds
Examples: Decentraland, The Sandbox (virtual), Propy (real estate)
5. Identity & Credentials
Use: Diplomas, certificates, licenses as NFTs
Benefit: Tamper-proof, easily verifiable credentials
6. Domain Names
Use: Blockchain domains (.eth, .crypto) as NFTs
Benefit: You truly own the domain, no renewal fees
Examples: ENS (Ethereum Name Service), Unstoppable Domains
7. Membership & Access
Use: NFTs as membership cards or event tickets
Benefit: Verifiable, transferable, can't be counterfeited
8. Fashion & Luxury Goods
Use: Digital fashion for avatars, or authenticity certificates for physical items
Examples: Nike, Gucci, Adidas NFT collections
How to Buy NFTs
Get a Crypto Wallet
MetaMask (most popular), Coinbase Wallet, or Trust Wallet
Buy Cryptocurrency
Most NFTs are on Ethereum, so buy ETH. Use Koinonos for zero fees.
Send ETH to Your Wallet
Transfer from exchange to your wallet address
Connect to NFT Marketplace
Visit OpenSea, Rarible, etc. and connect your wallet
Browse & Buy
Find an NFT you like, click "Buy Now" or place a bid
Confirm Transaction
Approve in your wallet, pay gas fees, NFT transfers to you
Buying Tips
Research First
Check creator's reputation, project roadmap, community
Verify Authenticity
Make sure it's the official collection (check verified badge)
Check Rarity
Use rarity tools to see how rare traits are
Consider Gas Fees
Ethereum gas can be $50-200, time your purchase wisely
How to Create (Mint) NFTs
Anyone can create NFTs - no coding required!
Create Your Digital Asset
Art, music, video, 3D model - any digital file
Choose a Blockchain
Ethereum (most popular), Solana (cheaper), Polygon (free minting)
Pick a Marketplace
OpenSea (easiest), Rarible, Foundation, or others
Connect Wallet & Upload
Connect wallet, upload file, add title/description
Set Properties
Royalties (5-10% typical), supply (1 of 1 or multiple), unlockable content
Mint (Create) NFT
Click "Create", pay gas fee (or free on some platforms), NFT is minted!
Creator Tips
- Build Community: Engage on Twitter, Discord before launching
- Tell a Story: NFTs with narrative/utility sell better
- Set Fair Royalties: 5-10% is standard for secondary sales
- Market Your Work: NFTs don't sell themselves - promote actively
Popular NFT Marketplaces
OpenSea
Type: General marketplace (largest)
Chains: Ethereum, Polygon, Solana
Best For: Beginners, wide selection
Fees: 2.5% on sales
Blur
Type: Pro trader marketplace
Features: Advanced trading tools, 0% fees
Best For: Active NFT traders
Rarible
Type: Community-owned marketplace
Features: RARI governance token
Best For: Creators who want platform ownership
Foundation
Type: Curated art platform
Best For: High-quality digital art
Note: Invite-only for creators
Magic Eden
Type: Solana NFT marketplace
Best For: Lower fees, faster transactions
LooksRare
Type: Community-first marketplace
Features: Rewards for trading
Risks and Criticisms
1. Speculation & Volatility
Risk: NFT prices can crash 90%+ overnight
Reality: Most NFTs lose value; few appreciate
2. Scams & Fraud
Common Scams:
- Fake Collections: Copies of popular NFTs
- Rug Pulls: Creators disappear after selling
- Phishing: Fake websites stealing wallets
- Wash Trading: Fake sales to inflate value
3. Environmental Concerns
Issue: Ethereum (pre-Merge) used proof-of-work mining
Current State: Ethereum now uses proof-of-stake (99.95% less energy)
Alternatives: Solana, Tezos, Polygon are energy-efficient
4. Copyright & IP Issues
Problem: Owning an NFT ≠ owning copyright
Reality: You own the token, not necessarily rights to use/reproduce the art
5. Storage & Permanence
Risk: If hosting service shuts down, your NFT image could disappear
Solution: Look for NFTs stored on IPFS (decentralized) not centralized servers
6. Market Manipulation
Issue: Wash trading, pump-and-dump schemes common
The Future of NFTs
Beyond the Hype
While the 2021 NFT craze has cooled, the technology has lasting applications:
Emerging Trends
1. Real-World Asset Tokenization
NFTs representing physical assets:
- Real estate deeds
- Luxury goods authentication
- Car titles
- Supply chain tracking
2. Gaming Integration
Play-to-earn and true digital ownership in games becoming mainstream
3. Metaverse Infrastructure
NFTs as the foundation for virtual world economies
4. Dynamic NFTs
NFTs that change based on conditions (weather, time, user actions)
5. Social Tokens
Creator economies built on NFT memberships
6. Enterprise Adoption
Companies using NFTs for:
- Customer loyalty programs
- Event ticketing
- Product authentication
- Digital twins of physical products
Long-Term Vision
NFTs represent a fundamental shift in digital ownership. In the future, we may:
- Own all our digital items (music, movies, games) as NFTs
- Have portable digital identities across platforms
- Trade real-world assets as easily as crypto
- Participate in creator economies directly
Conclusion
NFTs are unique digital tokens on a blockchain that prove ownership of digital or physical items. While they exploded in popularity with digital art and collectibles, their applications extend far beyond:
- Gaming items and virtual land
- Music and entertainment rights
- Identity and credentials
- Real-world asset tokenization
- Membership and access control
The 2021 NFT boom was driven largely by speculation, and many projects have lost value. However, the underlying technology of verifiable digital ownership is revolutionary and will likely power future digital economies.
If you're interested in NFTs, start small, research thoroughly, and focus on projects with real utility or communities you genuinely want to join. Don't invest more than you can afford to lose, and be aware of scams and market manipulation.
Whether NFTs become mainstream or remain niche, they've proven that digital scarcity and ownership are possible - and that's a significant technological achievement.
Published: December 15, 2024
Disclaimer: This article was created to provide general information only. Please verify that the information is accurate and remember that technology changes very quickly - what is good today may not be valid tomorrow.
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