What are NFTs?

Disclaimer: Posts on the HyperTrader blog and associated HyperLinq websites are for educational and informational purposes only. These posts should not be taken as financial advice, nor are they meant to be viewed as trading advice. HyperLinq Inc. or the authors take no responsibility for any damages or losses.

When it comes to blockchain technology, NFTs have made the biggest buzz, especially earlier this year when an artist named Beeple sold an NFT for a whopping price of $69 Million. So what exactly are NFTs and what makes them worth so much money? Let’s find out.

NFT aKa Non-Fungible Tokens

NFTs are basically tokens that represent ownership of any unique asset such as digital art or collectibles. But, let us first understand the meaning of the term non-fungible before we delve into its significance and utility.

First of all, we’ve already discussed the concept of tokens in our earlier blog post. In essence,  a token represents an abstract value in a given blockchain ecosystem. In a more technical perspective, a token is simply an asset or unit of value representing programmable assets that are managed through a smart contract and an underlying distributed ledger.

Further read: Understanding Tokens: Security Vs Utility Tokens

Now, let’s get into the concept of fungibility. As per definition, fungibility is a property of an asset or commodity whose value is interchangeable with an asset or commodity of the same kind. For example, a $10 bill is worth the same as another $10 bill and you can easily interchange them. Similarly, Bitcoin and all other cryptocurrencies are fungible tokens as you can replace them with the same kind of cryptocurrency.

However, as the name suggests, NFTs are non-fungible tokens, meaning every NFT token is unique in nature and aren’t replaceable with other NFT tokens as they’re not worth the same. For example, collectible items such as cards, old currency notes are non-fungible in nature because they represent unique properties.

In essence, representing such real-word items with unique properties on blockchain as tokens is called NFTs or non-fungible tokens.

Now that we’ve understood the concept of NFTs, the question arises – why do we need NFTs in the first place? What’s the significance of creating tokens representing real-word unique items? Well, let’s find out.

Significance of NFTs

First of all, it’s a well-established fact that the world is going towards the digital realm. We’re spending more waking hours on the internet or digital realm than the physical world. As everything becomes more digital, there’s a huge need to replicate and represent properties of real-world items such as scarcity, uniqueness, and proof of ownership. For example, it’s easy to prove ownership of an apple in the real world, but the same becomes very challenging to prove ownership of an image of an apple in digital space. That’s why there’s a need for NFTs.

Besides, there’s another issue of platform limitance and dependency. For example, loyalty points on a specific platform or assets in a game cannot be exchanged for another platform’s points or any other form of currency. Again, NFTs solve this problem and create an open market for users to trade loyalty points.

Furthermore, as NFTs are built on blockchain technology, the proof of ownership for every NFT is in public record and can be verified by any individual. Also, they can be traded in a marketplace across the countries in a global market. 

NFTs also open a door for content creators to sell their work, retain ownership rights, and even claim royalties for further resale of their work. 

How do NFTs work?

Now that we have understood the concept and significance of NFTs, let’s delve into the working of NFT. First of all, if you’re an artist, you can go to a NFT marketplace such as OpenSea or Rarible and mint a token with a unique identifier. 

While creating an NFT, the creator gets to decide the scarcity of token, embed a certain percent of royalty for every resale of the NFT. Furthermore, NFTs are minted on a blockchain network, therefore, the token is not locked on a single marketplace or platform. The token is minted on the blockchain network and the owner holds all the rights of ownership. 


Coming to the conclusion, blockchain technology is revolutionizing innovation across the spectrum and NFTs are just one dimension. The use-case of NFTs are growing exponentially across the board from art ownership to gaming items, domain names, physical items, or even investments and collateral. 

Digital art is just the beginning, soon we’ll be seeing NFTs to represent ownership of almost all physical assets or commodities in the digital realm. Let the innovation begin…

#1 crypto trading terminal is here

Become a better Trader. Become a HyperTrader!

Start trading on the fastest, most secure trading platform.

More reads

%d bloggers like this: