Beginners Guide

What is NFT? Everything You Need To Know.

Written by: Qadir AK

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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Mar 12, 2022


If you have been keeping up with the latest news, you’ve probably heard of the hype surrounding non-fungible tokens (NFTs). NFTs are commonly known for non-replicable cryptographic tokens. The NFT market has gained tremendous popularity among investors and collectors. And are now one of the emerging trends amongst youths and celebs across the globe. 

Back in 2017, American company Larva Labs initiated CryptoPunks, a set of collectible digital characters traded using NFTs. This is the time they served as an excellent beginning point for understanding the concept. 

After that in 2021, public attention toward NFTs exploded, and an increase in cryptocurrency prices may have contributed to the rise in NFTs. We believe that the excitement around various cryptocurrencies, particularly the digital currency with great market capitalizations, has boosted NFT markets too.  

Let’s take a look at this dynamic idea known as NFTs!

What is an NFT? 

NFT stands for Non-Fungible Token. NFTs are data units that represent a unique digital asset that is authenticated and stored on the blockchain.  

As the name suggests ‘Non-Fungible’ refers to non-interchangeable which means no two NFTs are the same but can be sold and traded.  Hence each token is identified uniquely. 

The Non-fungible tokens digitally represent any item, including online assets like digital artwork or real-world assets like real estate. These are primarily used to sell and buy digital artworks and with that GIFs, tweets, virtual trading cards, photographs of tangible goods, video game skins, and virtual real estate are just a few examples.

NFTs provide ownership characteristics that make it easy to identify and transfer tokens between holders. In NFTs, owners can additionally add metadata or attributes related to the asset.

  • The NFT ERC-721 standard spawned and defined the basic interface—ownership details, security, and metadata—required for the exchange and distribution of gaming tokens. 
  • It was developed by some of the same people that created the ERC-20 smart contract. 
  • The ERC-1155 standard expands on the notion by lowering transaction and storage costs for non-fungible tokens and batching many non-fungible tokens into a single contract.

While you must have heard of  Crypto collectibles which are non-fungible tokens that can be generated on non-fungible token marketplaces. NFT markets are decentralized exchanges that leverage a blockchain to allow users to build and trade with one another.

NFT Collectibles are valuable items that collectors seek and purchase. Collectors might range from short-term traders to crypto billionaires who enjoy accumulating items such as  Art, music, video, sport, and games are just a few of the categories available. 

What are ERC-721 and ERC-1155?


The ERC-721 establishes a standard for NFT, i.e., this form of token is unique from others in the same Smart Contract and can have a different value and cannot be interchanged. 

Each ERC-721 token has its own set of contract values, such as a finely designed work of art or the ownership and identity information of a tokenized real-world commodity like a house. 

ERC-721s are robust in terms of immutability, ownership transparency, and security, despite their complete flexibility in the creation of a token. ERC-721 tokens are referred to as “non-fungible” because they are unique. 


ERC-721 is great for creating unique assets but transferred only one at a time which slows down the efficiency. ERC-1155 comes in, with its unique digital NFTs that allow for batch transfers of several tokens at once, at a far faster rate than ERC-721.

 ERC-1155 tokens are commonly referred to as a “next-generation multi-token standard,” and the technique taken here is really “multi-token.” Enjin created the ERC-1155 protocol, which supports both non-fungible and fungible tokens.

With ERC1155, one is now able to send multiple types of tokens in a single transaction, saving time and money. On top of the ERC1155 standard, it is also possible to create exchanges in the form of atomic swaps and escrows of several tokens. Because ERC1155 has removed this unnecessary step, the system no longer needs to authorize token contracts separately.

While NFTs seem to like to have appeared out of nowhere, they date back to 2012, here is an interesting history to know.

History of NFT

The year 2021 was the Year of NFTs in several aspects. It was a meteoric rise that allowed producers to readily commercialize their work while also providing collectors with a convenient option to buy and store value. 

Let’s kick start with the year 2012.


Meni Rosenfeld published a paper on Dec. 4, 2012, that established the idea of “Colored Coins,” which are issued on the blockchain. Colored Coins are a set of ways for representing and maintaining real-world assets on the blockchain, which can be used to prove asset ownership. They’re just regular Bitcoins with a mark on them that determines what they can be used for.

Even though the concept of Colored Coins was never fulfilled due to Bitcoin’s restrictions, it laid the framework for future NFT experiments. 


Kevin McCoy, a digital artist, minted the first-known NFT “Quantum” on May 3, 2014. Quantum is a pixelated octagon with a variety of shapes that pulse fascinatingly.

 The one-of-a-kind Quantum art sculpture sold for almost $1.4 million at a Sotheby auction on November 28, 2021.


The Ethereum blockchain was introduced in 2014, and its platform went live on July 30, 2015, ushering in a new era for NFTs. The Ethereum network introduced a set of token specifications that enabled developers to create their tokens.


It was the beginning of Ethereum’s dominance over NFTs. And had pioneered the issuance of game assets through their platform. Finally, the meme era began in 2016 with the Counterparty platform’s release of Rare Pepes NFTs.  

It was never meant to serve as storage for these alternative tokens. Many Bitcoin users objected to the idea of using valuable block space to store tokens that indicated image ownership. That marked the start of NFTs migrating to the Ethereum blockchain.


The Larva Labs studio, a two-person firm consisting of Canadian software developers Matt Hall and John Watkinson, launched the project in June 2017 known as Cryptopunk. It was the only one that used the ERC-20 to launch (ERC-721 hadn’t been introduced yet), yet many in the NFT sector refer to it as a combination of the ERC-20 and ERC-721 standards. 

CryptoKitties, a 2017 online game, was monetized by selling transferable cat NFTs, and its popularity raised awareness of NFTs.


Decentraland was the first to enter this field with its decentralized Ethereum-based VR platform (MANA). Gamers can explore, develop, play games, acquire objects, and more in Decentraland. 

Three trademark applications for NFTs were filed with the US Patent and Trademark Office in 2020. 


The Future of NFTs unfolded this year. The popularity of NFTs grew in 2021. Other Blockchains, like Cardano, Solana, Tezos, Flow, and others, have entered the fray with their own versions of NFTs. Introducing new rules to assure that the digital assets represented are truly unique. 

Specifically, the buying spree at the start of the second quarter of this year was so incredible that the mainstream media frequently predicted a massive bubble set to collapse. Similarly, the fourth quarter saw a huge increase in NFT demand, particularly in the metaverse field.  

Characteristics of NFTs

  • Limited: The scarcity of NFTs adds to their value. NFT creators can generate a limitless number of non-fungible tokens, and they frequently alter the tokens to promote interest.
  • Indivisible: Unlike Cryptocurrencies,  NFTs can’t be broken down into smaller units. Unless you pay the full price of a digital item, you will not be able to use it.
  • Unique: NFTs include a strong information tab that discusses what makes them special. This data is extremely genuine and authentic.
  • Ownership: The ownership of the asset transmitted is guaranteed by these tokens
  • Fraud Proof: They are easily transferable and unaffected by fraud.

How Does NFT Work? 

NFTs are stored on a blockchain, which is a decentralized public ledger that keeps track of every transaction. The majority of NFTs are stored on the Ethereum blockchain, which is a distributed public ledger that keeps track of transactions.  

NFTs allow for the transfer or claim of ownership of any unique piece of digital data, which can be tracked using Ethereum’s blockchain as a public ledger.  Minting of NFT is simply done by digital objects assigned for representing digital or non-digital assets such as below,

  • Digital Art: GIFs, Collectibles, Music, Videos.
  • Real-World Items: Deeds to a car, Tickets to a real-world event, Tokenized invoices, Legal documents,  Signatures
  • Lots and lots more options to get creative with

At a time, an NFT can only have one owner. The uniqueID and metadata that no other token can replicate are used to manage ownership. Smart contracts that assign ownership and govern the transferability of NFTs are used to create them.

When someone generates or mints an NFT, they are executing code from smart contracts that follow various standards, such as ERC-721. This data is stored on the blockchain, which is where the NFT is handled. 

The minting process includes the following steps:

  • Adding a new block to the game
  • Information verification
  • Incorporating data onto the blockchain

How to Create Your Own NFT? 

More people are creating NFTs in the hopes of earning from the current fad, owing to the possibility of large sums of money. 

Here’s a step-by-step method of making (or minting) NFT. 

  1. Pick your item 

You’ll need to figure out what kind of unique digital item you’d like to convert into an NFT. It might be a bespoke painting, photograph, song, collectible video game, meme, GIF, or even a tweet. An NFT is a one-of-a-kind digital artifact with only one owner. The NFT value is determined by the rarity of the item.

  1. Choose your Blockchain

After you’ve chosen your one-of-a-kind digital asset, you can begin the process of minting it into an NFT. The first step is to decide the blockchain technology you’ll employ for your NFT. Ethereum is the most popular among NFT artists and creators. Tezos, Polkadot, Cosmos, and Binance Smart Chain are also prominent alternatives.

  1. Set up your digital wallet

Your digital assets will be accessible through the wallet. Metamask, Math Wallet, AlphaWallet, Trust Wallet, and Coinbase Wallet are among the most popular NFT wallets.

You’ll want to buy some cryptocurrencies once you’ve set up your digital wallet. Most NFT sites accept Ether.  If you already have cryptocurrency, you’ll want to link it to your digital wallet so that you may create and trade NFTs with it.

  1. Select Your NFT Marketplace

It’s time to start making your NFT after you have a digital wallet and enough cryptocurrency. You’ll need to choose an NFT marketplace for this. OpenSea, Axie Marketplace, Larva Labs/CryptoPunks, NBA Top Shot Marketplace, Raible, SuperRare, Foundation, Nifty Gateway, Mintable, and ThetaDrop are some of the most popular NFT markets. 

  1. Upload your profile

You’re now ready to begin the actual minting of a new NFT. Select New Item, upload your artwork and include as many details as you wish. Click create when you’re ready to fire the trigger. 

Congratulations, you’ve just finished creating a token. Now you can set up a sale process.  

What is the NFT Marketplace?

The NFT marketplace is the digital marketplace and is similar to any eCommerce platform, where a token holder can store, sell, buy, and trade the token. 

The NFT Business Model is based on the purchase and sale of unique non-fungible tokens relating to art, video, audio, and other sorts on NFT marketplaces. 

Having a crypto wallet is required to transact at an NFT marketplace, as all transactions, including buying, selling, and storing NFTs, will take done through that crypto wallet.

The following are the five most renowned NFT marketplaces for Collectibles 

currently available:

  • OpenSea– Huge NFT Marketplace that Accepts 150 more Coins
  • Rarible– Best NFT Platform to Discover New Creators
  •  NFT LaunchPad – Exclusive Home of Lucky Block Platinum Rollers Club
  • Crypto. Com – No Fees for Buying NFTs
  • Binance– Purchase NFT Mystery Boxes

Top exchanges that enable NFT token trading are: 

  • Binance – Best Bitcoin Exchange with Huge Asset Selection
  • Coinbase – Respected Cryptocurrency Exchange featuring Free Crypto Wallet
  • Kraken – Best Crypto Exchange for Staking
  • eToro – Overall Best Crypto Exchange with Low Trading Fees
  • Webull – Cheapest Crypto Exchange for Casual Investors

NFT use cases Beyond Digital Artwork

  1. Ensuring Authencity of Products

NFTs can be used to verify that the item you’re buying is genuine. Because the blockchain can keep information about a product forever, tangible objects will soon be able to be checked for uniqueness and validity. NFTs can also be used to keep track of information regarding the production process, ensuring that everything is done fairly.

  1. Real Estate

Timestamped NFTs might be used to transfer land documents, offer confirmation of ownership, and even track changes in property value over time. 

  1. Medical Records and identity verification 

NFT ledgers can store an individual’s medical records without jeopardizing confidentiality or risking tampering with outside sources. This ensures that every record is accurate and secure from malicious attempts at manipulation. 

NFT Birth Certificates, for example, are a type of certificate that healthcare providers can give to newborns. Providing one of these NFTs to each child can be a quick and easy way to establish a lifelong identity on the blockchain that is linked to their birth certificate and then validated with NFT verification. 

  1. Supply Chain

NFTs can also help organizations track their products from the manufacturing stage to shipping and delivery. This allows customers to see what they’re spending their money on while also ensuring supply chain transparency. 

  1. Gaming Industry

NFTs and the gaming business are a perfect combination. By permitting NFT cross-platform gameplay, NFTs may be integrated into the gaming world. NFTs provide game producers with a new method to spread their brand and generate cash, while players are more likely to continue playing a game if they already own characters or goods in it.

NFTs also make it easier to trade in games, which can boost their worth because NFT objects in games might vary in rarity. 

  1. Metaverse 

The avatar in Metaverse is an NFT. It can’t be taken from you, and it’s your true identity in the space. NFTs can also be used to acquire other folk’s NFT avatars. 

Benefits of NFTs 

There are numerous reasons why investors might wish to purchase assets that have been tokenized into NFTs.

The following are some of the benefits of investing in NFTs:

  • Ownership: NFTs provide proof of ownership. Because NFTs are linked to a blockchain network, they can aid in the identification of ownership. 
  • Authenticity: Non-fungible tokens’ value is mostly dependent on their uniqueness. The blockchain, on which NFTs are placed, is immutable, which ensures their authenticity.
  • Transferability: Because NFTs are built on smart contracts, adding the usage of smart contracts makes ownership transfers simple. Smart contracts set certain requirements between the buyer and seller that must be met before ownership transfers may be accomplished. 
  • Boost Inclusive Growth: Most significant, the creators’ chances for future royalty payments with NFTs imply phenomenal consequences for future growth. 

Future of NFT

NFTs are a fascinating invention that is gaining a lot of attention as their usage grows. The attention-getting price tags on certain NFTs are adding fuel to the flames. 

While most of what we’ve seen in the NFT area so far has been tied to art and selling art, we’re sure to see many more applications in the next years.

Here are a few of the areas where intriguing work is being done From obvious use cases like gaming and anything involving the metaverse to obvious ones like real estate, healthcare, and insurance, the possibilities are endless. 

It’s evident that many major corporations are spending extensively on technology, and there’s a definite sense among some extremely clever and well-resourced individuals that it will play a part in our futures.


Nonetheless, if you want to join the blockchain revolution and view NFT ownership as a viable option, go for it.  However, do so in a responsible manner. Don’t invest a lot of money in NFTs and always go for low-cost positions. Otherwise, you may find yourself in a difficult financial and emotional situation.


How secure is an ERC721 NFT?

The smart contract you write to mint and transact determines the token’s security of the dApps that you create using ERC721 NFT.

How do NFT marketplaces work?

NFT markets are blockchain-based platforms where artists and designers may exhibit their work. Enthusiasts can bid on these NFTs in a time frame set by the seller, with the highest bidder receiving the artwork.

Why some NFTs are worth million?

The answer is ownership. The scarcity of NFTs, as well as the strong demand for them among collectors and investors, has fueled a lot of interest in tokens.

What is Ethereum and how does it relate to NFTs?

Ethereum is the blockchain on which NFTs are supported such as the ERC-721 token standard. It allows NFT creators to store digital artifacts and tokens on this blockchain.

How you can earn royalty from NFT?

When your NFT creation is sold on a marketplace, you’ll get a percentage of the sale price as royalties. The payments for NFT royalties are made indefinitely and are carried out automatically through smart contracts.  

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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