What Are NFTs?

A clear, jargon-free introduction to Non-Fungible Tokens, their history from 2014 to today, the standards that power them, and what you actually own when you buy one.

18 min · intermediate · part of NFTs & Digital Collectibles

Introduction to NFTs

You have probably heard the term **NFT** in the news, often alongside stories about digital artwork selling for millions of dollars or, more recently, stories about NFT prices collapsing. The headlines can make NFTs sound either revolutionary or absurd, depending on who is telling the story. The truth, as is usually the case with new technologies, lies somewhere in the middle. **NFT** stands for **Non-Fungible Token**. To understand that phrase, we first need to understand the word "fungible." Something is fungible if one unit is interchangeable with another of the same kind. A dollar bill is fungible because any dollar bill is worth the same as any other dollar bill — you do not care which specific bill you receive when someone hands you change. A barrel of West Texas Intermediate crude oil is fungible because one barrel of that grade is identical in value to another. A share of Apple stock is fungible because every share gives the holder the same rights. Something that is **non-fungible** is unique and cannot be swapped one-for-one with something identical. Your house is non-fungible because no other house has the same address, the same dimensions, the same neighbors, and the same history. A signed first-edition copy of a famous novel is non-fungible because the author's signature, the print run, and the specific copy's condition all combine into something one of a kind. The Mona Lisa is non-fungible. Your grandfather's wedding ring is non-fungible. An NFT, then, is a **unique digital token** recorded on a blockchain. While cryptocurrencies like Bitcoin or Ethereum's ETH are designed so that every coin is identical and interchangeable (fungible), each NFT carries its own identifier, its own history, and its own metadata. That uniqueness is what makes NFTs interesting — and what makes them genuinely different from the digital files we have all been swapping around for thirty years.

Also in this lesson

The Problem of Digital Ownership
A Real History — From Quantum to CryptoKitties
The 2021 Boom and the 2022-2023 Winter
The Standards: ERC-721, ERC-1155, ERC-721A, ERC-6551
What Do You Actually Own?
A Useful Analogy: Authenticated Collectibles

Key terms

NFT (Non-Fungible Token): A unique digital token on a blockchain that represents ownership of a specific digital or physical item. Unlike cryptocurrencies, each NFT has its own identifier and is not interchangeable with another token of the same type.
Fungible: Interchangeable and identical in value. A dollar bill is fungible because it can be swapped for any other dollar bill without any meaningful difference. Cryptocurrencies like Bitcoin and ETH are fungible.
ERC-721: The foundational Ethereum non-fungible token standard, finalized in June 2018 (proposed by Dieter Shirley and others). Each token under this standard has a unique identifier and is owned by exactly one wallet.
ERC-1155: The Ethereum Multi Token Standard, finalized in June 2019 by Witek Radomski of Enjin. A single contract can manage both fungible and non-fungible tokens and supports efficient batch transfers — popular in gaming.
ERC-721A: A popular open-source ERC-721 implementation released by Chiru Labs (Azuki) in January 2022. Optimizes gas costs for batch minting, letting a buyer mint many NFTs in a single transaction inexpensively.
ERC-6551 (Token Bound Accounts): A standard proposed in February 2023 that gives every NFT its own smart contract wallet, so an NFT can hold tokens, hold other NFTs, and sign transactions on its own. Useful for game characters and on-chain identity.
Metadata: Structured information attached to an NFT that describes the asset — typically a name, description, list of attributes, and a URL pointing to the image or media file. Stored either on-chain or off-chain.
IPFS: InterPlanetary File System, a peer-to-peer protocol for content-addressed file storage. Files are referenced by their content hash, not their location, making links durable as long as at least one node "pins" the file.
Arweave: A blockchain-based storage network designed for permanent storage. Users pay a one-time fee that endows ongoing storage for at least 200 years. Used by some NFT projects to store artwork permanently.
Provenance: The complete documented history of ownership of an item. Blockchains automatically maintain tamper-resistant provenance for every NFT transfer.
CC0: "Creative Commons Zero" — a license that effectively places work in the public domain. CC0 NFT projects (Nouns, Cryptoadz, Mfers) waive all rights so anyone can use the artwork for anything.
On-chain art: Artwork whose visual data is stored entirely inside the smart contract itself, rather than on an external server. Examples include Autoglyphs, Nouns, and the post-2021 CryptoPunks images.

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Educational only — not financial advice.