What is Non Fungible Tokens?

What Is a Non-Fungible Token (NFT)?

A Non-Fungible Token (NFT) is a uniquely identifiable digital asset recorded on a blockchain. Each NFT is assigned a distinct identifier and links to specific content or rights, serving as a certificate of ownership, provenance, and transaction history for digital works or items. Unlike fungible tokens—which are interchangeable on a one-to-one basis—NFTs are not mutually interchangeable, as each token represents different content and carries individual value.

To illustrate, consider a limited-edition concert ticket: each ticket has a unique serial number. NFTs bring this concept of “uniqueness” on-chain, enabling anyone to verify authenticity and ownership transparently.

Why Should You Understand NFTs?

NFTs enable digital assets to have verifiable ownership, tradability, and programmability.

Historically, it was difficult to prove the authenticity and rightful owner of digital images, audio files, or game skins. NFTs make the origins, issuers, and transaction records of digital works open and transparent, reducing counterfeiting and disputes. Holders can transfer assets across platforms without being locked into any single ecosystem.

NFTs also support programmable rights. Creators can use smart contracts to set rules for royalties on secondary sales, membership access, or airdrop distributions. Note that royalty enforcement depends on the platform and contract design; many marketplaces now apply optional or differentiated royalty models.

In practical terms, NFTs are used for concert tickets and sports event access verification, membership cards that unlock communities and exclusive activities, or brand collaborations issuing digital collectibles for user engagement.

How Do NFTs Work?

NFTs rely on blockchain technology and smart contracts for recording and execution.

A blockchain acts as a publicly accessible database tracking “who transferred what to whom at what time.” Smart contracts are programs deployed on-chain to automate agreed-upon rules—such as generating unique identifiers, restricting transfers, or distributing royalties.

"Minting" refers to registering a new NFT on the blockchain with its unique ID and linked content. Minting or transferring NFTs typically requires payment of gas fees—a network fee paid to blockchain participants. Gas fees fluctuate based on network congestion and token prices.

An NFT’s metadata describes its represented content, including image URLs, titles, and descriptions. Metadata can be stored on decentralized solutions like IPFS or Arweave, which offer resistance to tampering, or on centralized servers, which are cheaper but require trusting the operator.

Popular token standards include ERC-721 and ERC-1155. ERC-721 is the classic “one asset, one ID” model ideal for single artworks; ERC-1155 supports batches and multiple asset types under one contract—commonly used for game items with similar traits but multiple copies.

In day-to-day use, you’ll manage NFTs with a “wallet” such as MetaMask or Phantom for holding and signing transactions. After connecting your wallet to a marketplace, smart contracts handle NFT creation or transfer based on your actions; results are permanently recorded on-chain.

Common NFT Use Cases in Crypto

NFTs are prevalent in art, gaming, memberships, lending, and the Bitcoin ecosystem.

Digital art and branded collaborations are the most typical applications. Creators issue works; collectors trade them on secondary markets. Transparent records simplify ownership verification and provenance tracking.

In blockchain games, skins, items, or land plots are often issued as NFTs, allowing players to buy, sell, or reuse assets across multiple games in the same ecosystem. ERC-1155 is favored for managing batches of similar in-game items.

Membership and ticket NFTs grant entry or unlock benefits—for example, holding a series membership card can provide access to communities, enable participation in airdrops, or reserve spots at live events. Thanks to verifiability and transferability, these credentials support both user engagement and secondary market trading.

In lending and financial applications, NFTs can serve as collateral. Users deposit NFTs into lending protocols for liquidity; price volatility or defaults may trigger liquidation events—users should be mindful of associated risks.

In the Bitcoin ecosystem, “inscriptions” offer NFT-like assets by engraving data onto Bitcoin’s smallest units. These create another form of “on-chain uniqueness,” with trading activity closely tied to Bitcoin price movements.

How to Purchase NFTs

Acquire native tokens of the target blockchain first, then place orders on trusted marketplaces.

Step 1: Register an account on Gate and complete required identity verification to ensure withdrawal and fiat funding functions operate smoothly.

Step 2: Buy the relevant blockchain token on Gate (e.g., ETH for Ethereum or SOL for Solana). Maintain a sufficient balance for upcoming gas fees and platform charges.

Step 3: Prepare your wallet—MetaMask is commonly used for Ethereum; Phantom for Solana. Transfer tokens purchased on Gate to your wallet address. Start with a small test withdrawal to confirm accuracy.

Step 4: Connect to reputable NFT marketplaces such as OpenSea (Ethereum), Magic Eden (Solana), or Gate’s NFT market/activity page. Always use official links and verify contract addresses and issuer details.

Step 5: Select your desired NFT and place an order. You’ll see item price, platform fee, and royalty settings before confirming via wallet signature. Once processed by the blockchain, your NFT will appear in your wallet or market asset tab.

Step 6: Implement security and asset management best practices. Use only official channels and verified contracts; beware of phishing sites and fake airdrops. For high-value NFTs, consider diversified holdings or hardware wallets to mitigate single-point risks.

For certain project launches, Gate offers lottery draws or blind box events—users can participate directly on-platform before transferring NFTs externally or trading within Gate.

Recent NFT Trends and Data Worth Watching

Over the past year, the market has seen polarization: high-value art and brand collaborations remain dominant on Ethereum; frequent trading and emerging projects thrive on Solana; inscription minting and trading volume in Bitcoin fluctuate with market sentiment.

According to public dashboards and reports, 2024 has shown recovery compared to 2023—Solana ranks highly in monthly transaction counts; Ethereum maintains high floor prices and visibility for top-tier art and legacy collections. See CryptoSlam and DappRadar for annual/monthly summaries.

In Q3-Q4 2024, daily Bitcoin Ordinals minting peaked at hundreds of thousands per day; transaction volume varied with Bitcoin prices and network fees. Track related data via Dune community dashboards and CryptoSlam features.

Key metrics to follow this year include: monthly trading volume and active wallets on major chains (Ethereum, Solana, Bitcoin); royalty enforcement rates and platform fee adjustments; issuance volume and retention rates for art/ticket NFTs. These indicators help assess whether market activity is driven by genuine users or short-term speculation. Data methodologies vary by source—cross-reference multiple dashboards for accuracy.

Related Terms

• Smart Contract: Self-executing code deployed on blockchain networks for managing NFT ownership and transactions.
• Blockchain: Distributed ledger technology providing decentralized recordkeeping and verification for NFTs.
• Gas Fee: Transaction fee required to execute operations or mint NFTs on blockchain networks.
• Minting: The process of creating a digital asset as an NFT and recording it on the blockchain.
• Wallet: Digital tool for storing/managing NFTs and private keys—used for transactions/transfers.
• Metadata: Information describing NFT attributes such as name, image URL, properties, etc.

FAQ

What Sets NFTs Apart from Regular Digital Goods?

The core difference is uniqueness and confirmed ownership. Regular digital goods can be copied infinitely; NFTs leverage blockchain technology to ensure each token is one-of-a-kind—owning an NFT is like holding an official certificate with anti-counterfeit features. This enables NFTs to represent artwork, collectibles, even virtual real estate—with full transaction histories that cannot be forged.

How Can You Evaluate If an NFT Project Is Worth Buying?

First assess creator background and project reputation—NFTs from well-known artists or institutions are generally more secure. Next review community engagement and floor price trends; an active community indicates confidence among holders. Finally check transaction history and volume on trusted platforms like Gate—avoid low-liquidity projects or those promising high returns without substantiated backing.

What Fees Are Involved in NFT Trading?

NFT transactions mainly incur three types of fees: gas fees (blockchain network charges that fluctuate with congestion), platform transaction fees (typically 2–5% at exchanges), and royalties (set by some creators—paid upon resale). On-chain transactions often have higher costs; platforms like Gate provide more stable fee structures.

Where Are My Purchased NFTs Stored—and Are They Secure?

NFTs are stored directly on the blockchain; only your private key allows access or transfer. As long as you securely store your private key/seed phrase, no one can steal your NFT—making it safer than most traditional digital assets. For high-value NFTs use hardware wallets instead of keeping them long-term on exchanges—this protects against platform breaches.

Why Is NFT Market Liquidity Often Low?

NFT liquidity is limited because each token is unique—there are no identical NFTs to swap like fungible tokens (e.g., Bitcoin), which are uniform in quantity/specification. The value of each NFT depends entirely on buyer demand; projects with strong brands or vibrant communities tend to have better liquidity while niche NFTs may be harder to sell quickly—factor this risk into purchasing decisions.

References & Further Reading

• https://en.wikipedia.org/wiki/Non-fungible_token
• https://www.investopedia.com/non-fungible-tokens-nft-5115211
• https://www.weforum.org/stories/2023/10/nfts-non-fungible-tokens-blockchain/
• https://www.gao.gov/products/gao-22-105990
• https://www.law.cornell.edu/wex/non-fungible_token_%28nft%29
• https://www.ibm.com/think/topics/nft
• https://www.coursera.org/articles/what-is-an-nft