Investing.com UK

  • Markets
  • News
  • Analysis
  • Charts
  • Technical
  • Tools
  • Portfolio
  • Webinars
  • InvestingPro
      Academy
      • Crypto
      • Currencies
      • Stocks
      • Analysis
      • ETFs
      • Trading
      • Statistics
      • InvestingPro 101

      Table of contents

      • What does NFT stand for?
      • How do NFTs work?
      • What is NFT art?
      • How and where to buy NFTs
      • What are NFTs used for?
      • How to make an NFT
      • What is the future for NFTs?

      Academy Center > Crypto

      Crypto Beginner

      What is an NFT?

      written by
      Jimmy Aki
      arrow-top

      Personal Finance, Cryptocurrency Trading, Mining

      Blockchain Instructor, Trader and Writer

      University of Virginia, Darden

      • linkedin logo
      • twitter logo
      See Full Bio
      | updated August 21, 2024
      Blog header showing a neon sign saying 'NFT' and the blog title on the right

      NFT or a non-fungible token is a cryptographically-unique token stored on a distributed ledger technology (DLT) better known as the blockchain. They are non-interchangeable, meaning one NFT cannot be swapped for another and do not carry the same valuation given their uniqueness.

      While the sub-sector is only just becoming popular, NFTs are producible as images, arts, videos, and other digital files. These are authentic certificates proving ownership with the ownership permanently imprinted on the blockchain, except when a new party assumes ownership.

      They have also seeped into the gaming industry with popular play-to-earn game Axie Infinity heralding massive interest in the nascent industry.

      NFTs grabbed headlines following the record sale of digital artist Beeple’s Everydays: the First 5000 Days NFT artwork for $69.3 million in 2021. Since then, celebrities and public figures have delved into the space. An example is Twitter CEO Jack Dorsey selling his first tweet as an NFT for over $2 million.

      What does NFT stand for?

      NFT is short form for non-fungible token. They are “non-fungible” because each NFT cannot replace another as each comes with unique features. The uniqueness is further differentiated, with some being ‘rare,’ ‘super-rare,’ ‘limited,’ and several other types. 

      For example, Bitcoin and fiat currencies like the pound sterling are fungible assets. You can easily swap one BTC or £1 for another without any marked differences in either form of currencies. 

      NFTs are different. You can’t easily swap one asset for another.

      NFTs operate on the same principle as a one-of-a-kind memento of your favourite football player. If you exchange it for a different trading card, you will likely get something entirely different from the former. This differentiates NFTs from other cryptocurrencies or fiat.

      How do NFTs work?

      NFTs are resident on the blockchain, the Ethereum blockchain to be precise. 

      Ethereum is different from Bitcoin because of its robust network architecture. This uniqueness allows Ethereum to support blockchain-based applications like NFTs.

      Each NFT is minted on the Ethereum ecosystem, although some rival blockchains now support NFT minting. The NFTs are minted or created from tangible and intangible items and often include arts, GIFs, short video clips and sports highlights, collectibles, virtual avatar and video game skins, designer wearables, music, and even tweets. 

      By extension, NFTs are digital representations of physical and everyday items. They also operate on the principle of exclusivity, whereby only one owner can exist at a time. Each item can be easily verified on the blockchain even if the image or GIF is replicated.

      What is NFT art?

      NFT arts are a digital version of real-world art which means you cannot physically touch it, although you can own it. These NFTs are stored on blockchains that support the minting of these cryptographically-unique tokens.

      Digital art has been a major contributor to the adoption of NFTs, and the foremost authority in this niche has been Mike Winkelmann, better known as Beeple. 

      He sold his Everydays: the First 5000 Days artwork for $69.3 million with a resale of his Donald Trump-themed digital piece called Crossroads going for $6.6 million on Nifty Gateway, an NFT marketplace for artists.

      Aside from Beeple, other remarkable NFT art collections have broken into the limelight. Some of the most popular ones in 2021 were CryptoPunks which are 10,000 uniquely generated avatars and Bored Ape Yacht Club (BAYC). Other runners-up are Bored Ape Kernel Club (BAKC) and The Meebits, from BAYC and CryptoPunks.

      How and where to buy NFTs

      If you’re familiar with buying and storing Bitcoin in a wallet, you shouldn’t have a problem buying NFTs.

      Even though NFTs are purchased slightly differently from traditional cryptocurrencies, the steps are straightforward: Create a wallet, buy Ether, and connect to an NFT marketplace or platform to buy your NFT.

      The first step will be to create a MetaMask wallet or any other cryptocurrency wallet that supports the storage of NFTs. Most digital wallets are easy to set up, so you shouldn’t have problems creating one or setting up a backup phrase.

      The second step would be to buy Ethereum.

      Ethereum’s Ether token is the dominant force in the NFT ecosystem, and most NFT marketplaces accept Ether as payment for these cryptographic tokens. Ether is available on popular centralised crypto exchanges like Binance, Coinbase, or on crypto broker eToro.

      The next step will be to transfer the purchased Ether to your MetaMask wallet and connect to the NFT marketplace from which you want to buy the NFT. The most popular secondary sales hub for NFTs is Ethereum-based OpenSea. There are also NFT-specific sales hubs like NBA TopShot for video highlights and Axie Infinity for Axies. Connect your MetaMask wallet and place a bid on, or buy outright, the NFT you want.

      What are NFTs used for?

      NFTs allow artists to directly monetize their art without relying on centralised platforms like physical auction houses or art galleries.

      Musicians have also keyed into the trend by sharing their songs directly with their consumers while eliminating third-party platforms like Spotify and Shazam. This feature brings in more revenue and allows them to interact with their audience directly.

      NFTs also support subsequent resales where the content creator can earn royalties on them. Several NFT marketplaces like OpenSea afford this option and is a major source of passive income for many artists and digital content creators.

      However, beyond these early applications, NFTs have also found their way into other industries. Specifically, they have grown in popularity in the gaming sector. 

      NFTs are used to create non-duplicable in-game items that enable gamers to easily verify the authentic owner of the collectible. These in-game unique items can then be sold for far more value in the marketplace.

      This is where play-to-earn (P2E) games like Axie Infinity are gaining major traction. Players buy and upgrade NFTs called Axies which can be later sold on the Axie Marketplace at higher prices.

      NFTs can also play a crucial role in identity management. NFTs can be hard-coded to digitally store and protect important documents like degrees, medical history, and licences. This way, the owner’s vital info is immutably stored on the blockchain. This addresses the issue of copyright infringements and theft as users’ details are kept on the blockchain.

      Real estate is another area where non-fungible tokens shine. Virtual plots of lands can be sold as NFTs. Blockchain platforms like Decentraland and The Sandbox are popular examples in this space. Virtual properties like the digital “Mars House” sold for $500K as the first NFT home. NFTs are also being tested to represent ownership of physical real estate.

      How to make an NFT

      Although the technology behind NFTs may be complex for most people, many platforms make it easy for anyone to create an NFT of anything you want. 

      NFT marketplaces like OpenSea don’t just cater to sales of the unique tokens, but also enable users to mint NFTs directly on the platform. 

      All you have to do is create an account and click on ‘Create’ to select the digital work you want to turn into an NFT. Once you have selected your chosen work, input the necessary details about the project and set your royalty figure.

      Choose the blockchain you want to mint your NFT on. As an example, OpenSea supports Ethereum and layer-two protocol Polygon. Choose the number of NFTs you want to mint and click on ‘Create’ to conclude the steps.

      What is the future for NFTs?

      NFTs started 2021 at a paltry sales figure of only $10 million. However, by the end of the year, the nascent sub-sector had grown 10x that figure with over $10 billion in NFT sales recorded. 

      Advocates who have pointed out that NFTs have the potential to transform the creative industry may be right in saying so, given the number of public figures that own NFTs or are in the NFT business now. 

      The influx of deep-pocketed investors has seen a lot of retail investors ostracised from the NFT ecosystem. However, the tide is expected to shift as more industries embrace the unique tokens.

      Given this, NFTs are expected to become a new way of expression and a more digitised way of connecting with the world around us. Advocates have pointed out that NFTs are still in their infancy. This gives room for more growth as adoption picks up.

      • Related
      • Recent
        Blog header showing floating interlinked cubes and the blog title on the right
        Blockchain Definition: What You Need to Know
        Blog header showing a pile of golden physical bitcoin and the blog title on the right
        How Does Bitcoin Mining Work? What is Crypto Mining?
        Blog header showing a physical bitcoin sliced in half standing vertically and the blog title on the right
        What is Bitcoin Halving?
        Blog header showing a physical bitcoin standing vertically and the blog title on the right
        What is Crypto? A Beginner’s Guide to Cryptocurrency
        Full ISA Guide 2025: An Intro To Individual Savings Accounts
        Best UK Stocks Under £20 Blog Header Image
        Best Cheap UK Stocks Under £20 with High Upside (April 2025)
        How To Use A Stock Screener To Find The Best UK Stocks
        What Is a Stock Screener?
        How Much Is InvestingPro Subscription Pricing, And Is It Worth It?
        Blog header image showing two person-miniatures each sitting on a stack of money with the blog title on the right
        Best Stock Comparison Tools (2024)
        Blog header image showing a trader on their phone with a candlestick chart up on a laptop in the background with the blog title on the right
        Best Stock Picking Tools (2024)
        Blog header showing a screenshot from InvestingPro with the blog title on the right
        InvestingPro Discount Code
        Blog header futures commodity items in front of a candlestick chart with the blog title on the right
        What Are FTSE 100 Futures? An Investor’s Guide
        Blog header showing screenshots from the InvestingPro platform with the blog title on the right
        Best UK Stocks To Buy In April 2025

      Recent Articles

      Blog header showing a pile of golden physical bitcoin and the blog title on the right

      How Does Bitcoin Mining Work? What is Crypto Mining?

      Bitcoin mining is the process of securing the blockchain in exchange for rewards. It’s a crucial process for the Bitcoin ecosystem. This guide explains the

      Blog header showing a physical bitcoin sliced in half standing vertically and the blog title on the right

      What is Bitcoin Halving?

      Bitcoin (BTC) Halving is the process where the rate and rewards for mining bitcoin are cut in half. The event happens every four years. Bitcoin

      Blog header showing floating interlinked cubes and the blog title on the right

      Blockchain Definition: What You Need to Know

      Blockchain technology is one of the most exciting forms of technology globally. But, very few people understand the concept. This guide breaks down everything you

      Blog header showing a physical bitcoin standing vertically and the blog title on the right

      What is Crypto? A Beginner’s Guide to Cryptocurrency

      If you’ve been following the news, you might have asked the “What is cryptocurrency” question a few times. Who hasn’t? Especially with Bitcoin posting unusual


      Install Our Apps

      Scan the QR code or install from the link

      www.facebook.comApp Store www.twitter.comGoogle Play

      www.investing.com
      • Blog
      • Mobile
      • Your Portfolio
      • Widgets
      • About Us
      • Advertise
      • Help & Support
      Investing.com
      www.facebook.com www.twitter.com

      Risk Disclosure: Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible. Currency trading on margin involves high risk, and is not suitable for all investors. Before deciding to trade foreign exchange or any other financial instrument you should carefully consider your investment objectives, level of experience, and risk appetite. Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

      Fusion Media does not endorse any product or service and does not assume any liability regarding your interaction with any third party displayed on this site, including the nature, quality, supply or fitness for a particular purpose of the product or service, or any damage caused as a result of the use of such product or service.


      © 2007-2025 Fusion Media Limited. All Rights Reserved
      • Terms and Conditions
      • Privacy Policy
      • Risk Warning