Non-Fungible Token (NFT): What It Means and How It Works 2025
What Is a Non-Fungible Token (NFT)?
Non-fungible tokens (NFTs) are assets like a piece of art, digital content, or video that have been tokenized via a blockchain. Tokens are unique identification codes created from metadata via an encryption function. These tokens are then stored on a blockchain, while the assets themselves are stored in other places. The connection between the token and the asset is what makes them unique.
NFTs can be traded and exchanged for money, cryptocurrencies, or other NFTs — it all depends on the value the market and owners have placed on them. For instance, you could draw a smiley face on a banana, take a picture of it (which has metadata attached to it), and tokenize it on a blockchain. Whoever has the private keys to that token owns whatever rights you have assigned to it.
Cryptocurrencies are tokens as well; however, the key difference is that two cryptocurrencies from the same blockchain are interchangeable — they are fungible. Two NFTs from the same blockchain can look identical, but they are not interchangeable.
Key Takeaways
- NFTs (non-fungible tokens) are unique cryptographic tokens that exist on a blockchain and cannot be replicated.
- NFTs can represent digital or real-world items like artwork and real estate.
- “Tokenizing” these real-world tangible assets makes buying, selling, and trading…
