What is NFT and How Does NFT Work?

NFT stands for “non-fungible token,” a kind of cryptocurrency that represents ownership of a digital asset.

They’re unlike other forms of cryptocurrency like Bitcoin in that each NFT is unique and non-interchangeable—a single NFT could be used to represent anything from a piece of digital art to a virtual real estate deed to collectible trading cards.

Here’s an example: imagine you want to buy some crypto kitties (digital cats). Each kitty has its characteristics, just like the real thing, but they all exist on the blockchain.

You use your Ether or Bitcoin to pay for the kitty, and now you own it! Just like with other cryptocurrencies, NFTs are stored in blockchain wallets.

The Use of NFT In The Digital World

Most of the talk about NFTs has originated in the digital art space, but these tokens are widely applicable. You can buy an NFT and hold it as a digital collectible, or you can use one to purchase a piece of work from an artist.

NFTs could also be used to own domains, buy products that give you access to special features on platforms like Twitter and YouTube, or even be used for your ticket when buying something at a concert venue.

At present, most of the utility offered by NFTs is related to owning or receiving items in digital spaces.

How To Buy NFT?

You could buy NFTs on a number of online marketplaces that allow you to buy, sell, and trade them. Some of the most popular ones include:

  • CryptoKitties
  • OpenSea
  • Viv3 (for 3D art)
  • Rarible (for decentralized apps)

The fees for selling an NFT vary by platform. For example, CryptoKitties charges sellers 3.75%, while Rarible charges no fee to list your NFT but takes a 5% cut when it is sold.

Should You Invest in NFTs?

When it comes to investing, there’s no hard and fast rule of what you should do. What’s right for one person could be wrong for another.

For example,

I know someone who is deeply invested in quality socks; he’s so into quality socks that his entire Instagram is dedicated to his sock collection.

This has improved the quality of his life overall, but would probably be a poor investment opportunity for anyone else.

Similarly, if NFTs are something you’re interested in and have considered investing in, then there’s no reason you shouldn’t do so (as long as you do your research first).

You Can Create Your Own NFTs Too?

If the idea of creating your NFT sounds interesting, there are plenty of ways to go about it. One option is to use a service like Nifty Gateway or Rarible, which let you create and sell an image as an NFT on their respective platforms.

Both of these services have user-friendly walkthroughs that will take you through the process step by step. For a more “hands-on,” low-level approach, you can experiment with the Ethereum blockchain by using some tools like Remix or Truffle Suite.

When creating an NFT, the artist first needs to transform whatever they want to sell into an image file that is either 512×512 pixels or 1024×1024 pixels in size. The next step is where things get interesting: data from this image file is used by a developer to generate code for a smart contract (a set of instructions for how this particular NFT works).

This code is then uploaded to Ethereum’s blockchain, where it becomes part of a permanent record showing ownership of this specific digital asset (the ownership record also shows who created and minted—i.e., put into circulation—the asset).

What makes an artistically valuable NFT?

That depends entirely on what people are willing to pay for! While one person may be willing to shell out $4 million for the latest Beeple artwork, another may find great value in a piece that cost just $100 because it’s something they enjoy looking at on their phone’s background every day.


To recap, non-fungible tokens are created by smart contracts on a blockchain.

Artists, musicians, and other creators can use these tokens to make digital art more accessible to collectors and give digital art more ownership benefits than it usually has.

Further Reading