Understanding NFTs: What Are They and How Do They Work?
NFTs, or Non-Fungible Tokens, are unique digital assets stored on a blockchain that represent ownership of a specific item, whether it's digital artwork, music, collectibles, or even real-world assets. Unlike cryptocurrencies such as Bitcoin or Ethereum, which are fungible (meaning they can be exchanged on a one-to-one basis), NFTs are non-fungible, meaning each one is unique and cannot be directly exchanged for another NFT of equal value.
The uniqueness of NFTs is ensured through blockchain technology, where each NFT is assigned a distinct cryptographic identifier. This identifier stores essential information, including ownership history, metadata, and smart contract rules, making it easy to verify authenticity and prove ownership.
Most NFTs are built on blockchain networks that support smart contracts, such as Ethereum (ERC-721 and ERC-1155 standards), Solana, and Binance Smart Chain. These smart contracts define the rules for ownership transfers, royalties, and other attributes, ensuring that creators retain rights and earn royalties whenever their NFT is resold.