1. Home
  2. /
  3. Personal Finance
  4. /
  5. Non-Fungible Token (NFT): What...

Non-Fungible Token (NFT): What It Means and How It Works

  1. Home
  2. »
  3. Personal Finance
  4. »
  5. Non-Fungible Token (NFT): What It…

Blockchain technology has ushered in a new era of digital ownership, epitomized by the rise of Non-Fungible Tokens (NFTs). These digital assets have captured the world’s imagination, offering a way to ascribe value and ownership to items that, until recently, seemed beyond the scope of such attribution.

What is NFT?

An NFT is a digital asset representing real-world objects like art, music, in-game items, and videos. It is bought and sold online, frequently with cryptocurrency, and is encoded with the same underlying software as many cryptos.

The Distinct Nature of NFTs

Unlike cryptocurrencies, NFTs are not mutually interchangeable, which means no two NFTs are the same. This non-fungibility is akin to owning an original painting. While prints or copies can be made, the original holds a distinct value due to its authenticity and the artist’s touch.

The History and Evolution of NFTs

NFTs have existed since the creation of the Ethereum blockchain with a standard known as ERC-721. This standard was developed to define the minimum interface—ownership details, security, and metadata—required for the exchange and distribution of gaming tokens. The ERC-1155 standard expanded upon this, enabling a single contract to contain fungible and non-fungible tokens, thus optimizing transactions and saving digital investing costs.

Exploring the NFT Market

The NFT market has exploded in popularity, with platforms like OpenSea and Rarible leading the charge as places to  create, buy, sell, and auction NFTs. This market has become a new frontier for artists and creators to monetize their work directly through digital ownership.

How Do NFTs Work?

NFTs exist on a blockchain, which is a distributed public ledger that records transactions. They are typically held on the Ethereum blockchain, although other blockchains also support them. An NFT is created or minted from digital objects representing   tangible and intangible items. It  includes everything from virtual real estate and virtual goods in video games to digital artwork and music files.

The Market for NFTs

The NFT market has seen a meteoric rise, with numerous platforms facilitating the creation, sale, and purchase of these tokens. The allure of NFTs lies in their ability to confer ownership of a digital item, which can be a lucrative prospect for collectors and artists alike.

The Meaning Behind NFTs

NFT stands for Non-Fungible Token, which signifies a non-interchangeable data unit stored on a blockchain. Each NFT can represent unique items and thus have a different value. They can be anything from collectible sports cards to virtual real estate and digital sneakers.

The Future of NFTs

As the NFT market grows, the potential applications of NFTs are limited by the imagination only. From representing physical property rights to securing digital identities, NFTs could play a pivotal role in the future of commerce, digital rights management, and even legal documentation.

How to Buy NFT

For those wondering how to buy an NFT, the process typically involves the following steps:

  1. Purchase Ethereum or another cryptocurrency used to trade NFTs.
  2. Transfer your cryptocurrency to a digital wallet that supports NFTs.
  3. Connect your wallet to an NFT marketplace.
  4. Browse the market for NFTs you’re interested in and make your purchase.

Remember, when buying an NFT, you’re not just buying a digital image or item; you’re buying a blockchain entry that proves your ownership of the original work.


NFTs are more than just a trend; they are a transformative technology that redefines digital ownership and authenticity. As the NFT market grows, it will be fascinating to see how NFTs evolve and integrate into various aspects of our digital lives. But before considering it as a financial option,   you should consider taking the help of a share market advisory. They can also help you select high-growth Indian stocks to invest in.

FAQs on Non-Fungible Token (NFT)

  1. Is NFT a cryptocurrency?

    No, an NFT is not a cryptocurrency. While NFTs are created using the same kind of programming as cryptocurrencies like Bitcoin or Ethereum, they are different in that they are unique and can’t be exchanged on a one-to-one basis like cryptocurrencies, which are fungible.

  2. How does an NFT make money?

    NFTs can generate money through various means:
    Creators can sell their NFTs directly in the market and earn from sales.
    Royalties can be programmed into NFTs, allowing creators to receive a percentage of sales whenever the NFT is sold to a new owner.
    Investors and collectors can buy and sell NFTs, hoping their value will increase time.

  3. Is NFT a good investment?

    Whether NFTs are a good investment opportunity is complex and depends on various factors. With proper due diligence, NFTs can be a good investment, but they are also considered an extremely risky asset class. The value of NFTs can fluctuate greatly, and like any investment, there is no guarantee of profit. It is essential to research and understand the market before investing in NFTs.

How useful was this post?

Click on a star to rate it!

Average rating 0 / 5. Vote count: 0

No votes so far! Be the first to rate this post.

+ posts

I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.

Share on:

Want A Personalized Portfolio of 20-25 Potential High Growth Stocks?

*T&C Apply

Chat with us