What is an NFT? Learn what it means and how they work.

An NFT, or non-fungible token, is a digital asset that cannot be divided into identical copies. Here's everything you need to know about them!


by Aline Barbosa

Published on 09/27/2022
Non-fungible token hologram on virtual digital screen, nft with network circuit and globe. Dark background. Concept of cryptoart and technology
If you still don’t know what an NFT is, this post will help you understand it. Source: Adobe Stock.

If you’ve been keeping up with crypto news these last couple of years, then you probably read the term “NFT” about a million times. But have you ever really wondered what an NFT is?

NFT is an acronym that stands for non-fungible token. This term is used to describe a type of digital asset that is not interchangeable with any other.

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Unlike traditional tokens or cryptocurrencies, each NFT is unique and can only be owned by one person at a time.

This feature makes them well-suited for use in certain applications, such as online gaming and collectibles.

The hype around these tokens became so big that in the past year, a growing number of celebrities have started to experiment with NFTs.

They’ve used them to launch virtual art galleries, release new music, and even sell personal items like clothing and jewelry.

But is there any real legitimacy to NFTs? Are they truly valuable or just another passing trend?

Keep reading the content below to learn more details about what is an NFT, how they work and why they became so popular in such a short period of time. 

What is an NFT and how does it work?

NFTs, or non-fungible tokens, are a type of digital asset that is stored on the blockchain. Unlike fiat currency or other cryptocurrencies, NFTs cannot be divided or exchanged for other assets.

Each NFT is unique and can be used to represent anything from a piece of artwork to a virtual world land.

While NFTs are still a relatively new technology, they have already gained popularity among digital artists and collectors.

On platforms like Ethereum, CryptoKitties, and Decentraland, users can buy, sell, or trade NFTs using smart contracts.

These transactions are recorded on the blockchain, ensuring that each NFT retains its value and uniqueness.

As the use of NFTs grows, it is likely that we will see more innovative applications for this technology in the years to come.

How did NFTs become so popular?

Creation of a digital art object. Create of a Non Fungible Token for sale on the NFT marketplace
You can by exclusive art online as NFT. Source: Adobe Stock.

Over the past year, NFTs have exploded in popularity, with major sales taking place from well-known artists and brands. But how did NFTs become so popular? There are a few key factors that certainly have contributed to it.

First, the rise of crypto currencies like Bitcoin and Ethereum created a new class of investors with disposable income who were looking for alternative investments.

Second, the gaming industry has embraced NFTs as a way to provide gamers with ownership of virtual items. Third, NFTs have provided a new way for artists to showcase and sell their work.

With their unique combination of scarcity, immutability, and verifiability, NFTs offer collectors a way to invest in digital art that is both meaningful and secure.

Finally, the growing trend of digital art and collecting has helped to fuel demand for NFTs. They have certainly emerged as a hot new asset class.

And as more people discover their potential, it’s likely that their popularity will continue to grow.

What are the benefits of owning an NFT?

Quite recently, the world of NFTs has blown up, with everyone from musicians to athletes to brands getting in on the action.

But are there any benefits to anyone who’s not famous or worth millions of dollars owning one?

For starters NFTs are digital assets that cannot be replicated. That means that unlike a traditional cryptocurrency like Bitcoin, each NFT is entirely unique.

This has led to NFTs becoming a popular way to collect and trade digital assets, as they can be easily authenticated and verified.

There are a number of benefits to owning an NFT. First of all, they can be a great way to show off your digital collections.

Unlike traditional digital assets which can be easily copied and shared, NFTs give collectors a way to show off their rare and valuable items. Secondly, NFTs can also be a great investment.

Due to their uniqueness, NFTs have been known to increase in value over time, meaning that they can be a wise investment for those looking to make some money in the digital world.

Finally, NFTs also offer creators a new way to monetize their work.

What is the difference between NFT and cryptocurrency?

African American man wearing VR glasses uses NFT interface in virtual cyberspace metaverse space
Crypto and NFT: is it the same thing? Source: Adobe Stock.

NFTs, or non-fungible tokens, and cryptocurrency are two types of digital assets that have gained popularity in recent years.

Both NFTs and cryptocurrencies are created using blockchain technology, which allows for secure and transparent transactions.

However, there are some key differences between the two types of assets. NFTs are unique and cannot be replaced, while cryptocurrency can be divided into smaller units.

They can be used to represent virtual or physical items, while cryptocurrency is primarily used as a form of payment.

NFTs are stored on a blockchain ledger, while cryptocurrency is stored in a digital wallet. Finally, NFTs can be bought and sold like any other asset, while cryptocurrency can also be mined. 

Are there any risks in buying NFTs?

Before buying an NFT, it is important to understand the potential risks involved. One of the biggest risks is that the value of an NFT can drop quickly and dramatically.

Unlike traditional investments, there is no guarantee that an NFT will retain its value over time.

NFTs are not regulated by any government entity, which means that there is no guarantee that you will receive the NFT you purchased or that it will be worth anything.

Additionally, because NFTs are stored on the blockchain, they are susceptible to hacking and fraud.

Finally, it is important to remember that most NFTs do not represent physical assets, which means that they can be difficult to sell or trade.

For all of these reasons, it is important to research an NFT before buying it, and to only invest as much money as you are comfortable losing.

What is cryptocurrency?

Now that you know what is an NFT, the next logical step is to enter the world of cryptocurrencies. But if that is still a foreign world to you, we can help.

Follow the link below to learn everything you need to know about cryptocurrencies. Including how they work, what you can use it for and the risks involved in investing in it.

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What is cryptocurrency?

Want to learn about cryptocurrency? Here's a comprehensive guide that covers everything from what it is, to how it works, to where you can use it.

About the author

Aline Barbosa

Aline Barbosa is an editor, writer and learning-enthusiast. Passionate about music, books and human behavior. Curious about the unknown. Believer that learning is a life-long process.

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