{"id":54373,"date":"2024-06-14T14:15:59","date_gmt":"2024-06-14T14:15:59","guid":{"rendered":"https:\/\/buycrypt.com\/blog\/what-is-an-nft\/"},"modified":"2026-10-12T20:07:05","modified_gmt":"2026-10-12T20:07:05","slug":"what-is-an-nft","status":"publish","type":"post","link":"https:\/\/buycrypt.com\/blog\/en\/what-is-an-nft\/","title":{"rendered":"NFTs Without the Hype: How They Work, Where They&#8217;re Useful and What the Risks Are"},"content":{"rendered":"<p class=\"bcl-lead\">To understand what an NFT is, forget the ape pictures for a moment and look at the technology itself. At its core, an NFT is just a record on a blockchain of who owns a unique digital item. In this lesson, we&#039;ll look at how non-fungible tokens work, what their owner actually gets, why the market went through a boom and a crash, and where NFTs are useful today. We&#039;ll also cover the risks and how to buy wisely.<\/p>\n<div class=\"bcl-tldr\">\n<div class=\"bcl-box-h\"><svg class=\"bcl-ic\" viewBox=\"0 0 24 24\" aria-hidden=\"true\" fill=\"none\" stroke=\"currentColor\" stroke-width=\"1.8\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><path d=\"M13 2 4 14h7l-1 8 9-12h-7l1-8z\"\/><\/svg>Key takeaways<\/div>\n<ul>\n<li>An NFT is a token with a unique number that can&#039;t be swapped one-for-one for another token like it.<\/li>\n<li>Most of the time, the blockchain doesn&#039;t hold the image itself, just a link to it and a record of the owner.<\/li>\n<li>Buying an NFT usually doesn&#039;t give you the copyright to the image.<\/li>\n<li>The main risks are low liquidity, inflated volumes and phishing through wallet signatures.<\/li>\n<\/ul>\n<\/div>\n<nav class=\"bcl-toc\" aria-label=\"Lesson contents\">\n<div class=\"bcl-box-h\"><svg class=\"bcl-ic\" viewBox=\"0 0 24 24\" aria-hidden=\"true\" fill=\"none\" stroke=\"currentColor\" stroke-width=\"1.8\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><path d=\"M8 6h13M8 12h13M8 18h13M3 6h.01M3 12h.01M3 18h.01\"\/><\/svg>In this lesson<\/div>\n<ol>\n<li><a href=\"#bcl-s1\">How a non-fungible token works<\/a><\/li>\n<li><a href=\"#bcl-s2\">What the owner actually buys<\/a><\/li>\n<li><a href=\"#bcl-s3\">Boom and bust: what happened to the market<\/a><\/li>\n<li><a href=\"#bcl-s4\">Where NFTs are useful today<\/a><\/li>\n<li><a href=\"#bcl-s5\">Risks and rules for buying safely<\/a><\/li>\n<\/ol>\n<\/nav>\n<h2 id=\"bcl-s1\">How a non-fungible token works<\/h2>\n<p>Take USDT: one token is indistinguishable from another, just like two $100 bills. They&#039;re fungible. NFTs are different. Inside the smart contract, every token in a collection has its own number, and two tokens from the same series aren&#039;t equal to each other, like theater tickets for different seats.<\/p>\n<p>Technically, an NFT is a record that says &quot;token number X belongs to address Y.&quot; On Ethereum, this uses the ERC-721 standard, or ERC-1155 for collections with many identical units, such as in-game potions. Solana and other networks have their own mechanisms, and in 2023 Ordinals appeared on the Bitcoin network, writing data directly into transactions.<\/p>\n<p>Like any blockchain asset, an NFT sits at your address, and only your wallet keys can move it. You can sell it, give it away or send it to another address, and the collection&#039;s smart contract can add its own conditions, such as a royalty paid to the creator on every resale. We covered how these programs work in <a href=\"https:\/\/buycrypt.com\/blog\/en\/smart-contracts-explained\/\">the lesson on smart contracts<\/a>.<\/p>\n<div class=\"bcl-note bcl-note-term\"><span class=\"bcl-note-i\"><svg class=\"bcl-ic\" viewBox=\"0 0 24 24\" aria-hidden=\"true\" fill=\"none\" stroke=\"currentColor\" stroke-width=\"1.8\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><path d=\"M4 4.5A2.5 2.5 0 0 1 6.5 2H20v17H6.5A2.5 2.5 0 0 0 4 21.5v-17z\"\/><path d=\"M4 19.5A2.5 2.5 0 0 1 6.5 17H20\"\/><\/svg><\/span><\/p>\n<div>\n<div class=\"bcl-note-k\">Term \u00b7 Mint<\/div>\n<p>Minting means issuing a new NFT: the token is created in the smart contract for the first time and assigned to the buyer&#039;s address. The mint price is the primary sale price.<\/p>\n<\/div>\n<\/div>\n<h2 id=\"bcl-s2\">What the owner actually buys<\/h2>\n<p>Storing videos and images on a blockchain is expensive, so most of the time the token holds a link to a file that describes it, the so-called metadata. That file lives either in decentralized storage like IPFS or on the project&#039;s regular server. In the second case, if the project shuts down and stops paying for hosting, the token stays, but the image behind the link may disappear for good.<\/p>\n<p>Don&#039;t confuse ownership with copyright: buying an NFT proves the first but usually doesn&#039;t give you the second. What you can do with the image depends on the license of the specific collection: some allow commercial use, others don&#039;t. If you plan to use the image in a business, read the terms instead of relying on the word &quot;owner.&quot;<\/p>\n<p>There are also fully on-chain collections, where the image itself, or the code that draws it, is written to the blockchain, as with Ordinals on the Bitcoin network. These tokens don&#039;t depend on third-party servers, but writing data on-chain is expensive, so they&#039;re rare.<\/p>\n<p>Finally, the value of a collectible NFT rests on other people wanting it. Such a token has no cash flow like a bond and no practical use like a ticket or a pass. If the community around a collection falls apart, there may be nobody left to sell it to.<\/p>\n<div class=\"bcl-note bcl-note-warn\"><span class=\"bcl-note-i\"><svg class=\"bcl-ic\" viewBox=\"0 0 24 24\" aria-hidden=\"true\" fill=\"none\" stroke=\"currentColor\" stroke-width=\"1.8\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><path d=\"M12 4 2.5 20h19L12 4z\"\/><path d=\"M12 10v4M12 17.2v.1\"\/><\/svg><\/span><\/p>\n<div>\n<div class=\"bcl-note-k\">Important \u00b7 Check where the file lives<\/div>\n<p>On the token&#039;s page on a marketplace or a blockchain explorer, look at the metadata address. A link to IPFS or data stored directly on the blockchain is more reliable than a link to the project&#039;s website.<\/p>\n<\/div>\n<\/div>\n<h2 id=\"bcl-s3\">Boom and bust: what happened to the market<\/h2>\n<p>The first NFT projects appeared long before the boom: CryptoPunks launched in 2017, the same year CryptoKitties made headlines. Mass interest arrived in 2021. That March, a digital work by Beeple sold at Christie&#039;s for about $69 million, and collections like Bored Ape Yacht Club became status symbols.<\/p>\n<p>Then came a long downturn. Trading volumes on marketplaces dropped several times over, prices of most collections crashed by 90% or more, and many projects abandoned their roadmaps. Marketplaces started competing for traders with zero fees, and in 2023 OpenSea made creator royalties on resales optional.<\/p>\n<p>Why did prices rise so fast? Cheap money after 2020 played a part, as did celebrities who swapped their profile pictures for tokens they&#039;d bought. Then there was simple momentum: each new buyer pushed up a collection&#039;s floor price, and that lured in the next one. A classic bubble in new packaging.<\/p>\n<p>The takeaway from this period: prices rested on the hope of reselling for more, not on anyone actually using the tokens. As soon as the flow of new buyers dried up, prices went down. You&#039;ll see a similar pattern in other trends too, such as <a href=\"https:\/\/buycrypt.com\/blog\/en\/metaverse-and-cryptocurrency\/\">metaverses<\/a> and social tokens.<\/p>\n<h2 id=\"bcl-s4\">Where NFTs are useful today<\/h2>\n<p>After the downturn, the focus shifted from collectible pictures to cases where a record of ownership is genuinely needed. Same technology, different use. Below are the main directions, with an honest look at their limitations.<\/p>\n<p>One interesting example is POAP, tokens for attending events. Someone who goes to a conference or an online meetup gets a free NFT proving they were there. People don&#039;t sell these tokens for profit; they collect them like digital badges, and organizers use them to find active participants and invite them to future events.<\/p>\n<p>Another direction is tokenizing wine, watches and artwork. Here, the NFT acts as a certificate for a physical item held by a company. Everything depends on how reliable the custodian is and how the legal side is set up: the token won&#039;t help if the item goes missing or the contract doesn&#039;t protect the owner.<\/p>\n<p>What these cases have in common is that the NFT isn&#039;t the product itself but a convenient way to prove access or ownership. Users may not even realize their ticket or in-game item is a token.<\/p>\n<div class=\"bcl-table\">\n<table>\n<thead>\n<tr>\n<th>Direction<\/th>\n<th>How NFTs are used<\/th>\n<th>Limitation<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Tickets and passes<\/td>\n<td>Protection against fakes, control over resale<\/td>\n<td>Needs the organizer&#039;s support and a convenient app<\/td>\n<\/tr>\n<tr>\n<td>In-game items<\/td>\n<td>Owning an item outside the game, selling it to other players<\/td>\n<td>The item is useful only as long as the game is alive<\/td>\n<\/tr>\n<tr>\n<td>Blockchain domains<\/td>\n<td>A short name instead of a long wallet address, for example in ENS<\/td>\n<td>Not supported by every wallet<\/td>\n<\/tr>\n<tr>\n<td>Membership and access<\/td>\n<td>The token unlocks a private chat, discounts or events<\/td>\n<td>Value depends on how active the community is<\/td>\n<\/tr>\n<tr>\n<td>Certificates and achievements<\/td>\n<td>Proof of participation or training<\/td>\n<td>The verifier has to be able to read the blockchain<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<h2 id=\"bcl-s5\">Risks and rules for buying safely<\/h2>\n<p>Liquidity in the NFT market leaves a lot to be desired. Unlike with Bitcoin, a specific token may have no buyer at any reasonable price. The floor, a collection&#039;s minimum price, only reflects the cheapest listing, not what someone will pay you right now. On top of that, some of the volume is fake: owners sell tokens to themselves.<\/p>\n<p>Don&#039;t forget about taxes either. In many countries, selling an NFT or swapping it for crypto is taxed the same way as trading regular coins. The rules differ, so if you trade often, keep your transaction history and check your country&#039;s requirements.<\/p>\n<p>But most money isn&#039;t lost in price drops; it&#039;s lost to scammers. Fake collections copy the names of well-known projects, and phishing sites talk you into signing a transaction that actually gives the attacker control over all your NFTs. We&#039;ve collected the warning signs of these schemes in the <a href=\"https:\/\/buycrypt.com\/blog\/en\/how-to-spot-crypto-scams\/\">lesson on scam projects<\/a>, and the legal side is covered in the guide on <a href=\"https:\/\/buycrypt.com\/blog\/en\/defi-nft-regulation\/\">regulation of DeFi and NFTs<\/a>.<\/p>\n<ol class=\"bcl-list\">\n<li>Get the link to a collection from the official website or the project&#039;s verified profile.<\/li>\n<li>Compare the collection&#039;s contract address on the marketplace with the official one.<\/li>\n<li>Look at the real sales history, not just the floor and 24-hour volume.<\/li>\n<li>Read exactly what you&#039;re signing in your wallet, especially requests for access to all your tokens.<\/li>\n<li>Keep valuable NFTs at a separate address that you never connect to random websites.<\/li>\n<li>Only put in an amount you&#039;re prepared to lose completely.<\/li>\n<\/ol>\n<div class=\"bcl-note bcl-note-warn\"><span class=\"bcl-note-i\"><svg class=\"bcl-ic\" viewBox=\"0 0 24 24\" aria-hidden=\"true\" fill=\"none\" stroke=\"currentColor\" stroke-width=\"1.8\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><path d=\"M12 4 2.5 20h19L12 4z\"\/><path d=\"M12 10v4M12 17.2v.1\"\/><\/svg><\/span><\/p>\n<div>\n<div class=\"bcl-note-k\">Important \u00b7 A dangerous signature<\/div>\n<p>A request for permission to manage all the tokens in a collection looks harmless, but once attackers have your signature, they can take those tokens without any further action from you. You can check and revoke the permissions you&#039;ve granted through a blockchain explorer or dedicated services.<\/p>\n<\/div>\n<\/div>\n<div class=\"bcl-practice\">\n<div class=\"bcl-practice-task\"><span class=\"bcl-practice-i\"><svg class=\"bcl-ic\" viewBox=\"0 0 24 24\" aria-hidden=\"true\" fill=\"none\" stroke=\"currentColor\" stroke-width=\"1.8\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><circle cx=\"12\" cy=\"12\" r=\"9\"\/><circle cx=\"12\" cy=\"12\" r=\"5\"\/><circle cx=\"12\" cy=\"12\" r=\"1.5\"\/><\/svg><\/span><\/p>\n<div>\n<div class=\"bcl-box-h\">Lesson task<\/div>\n<p>Open any well-known collection on a marketplace, such as CryptoPunks or Bored Ape Yacht Club, pick one token and find its contract address, token standard and metadata link in the description. You don&#039;t need to connect a wallet. Then answer three questions: Where is the image stored (IPFS, the project&#039;s server or the blockchain)? Does the contract address match the one on the official website? How many real sales did the collection have over the past month? That way, you&#039;ll check the token on exactly the points where buyers get fooled most often.<\/p>\n<\/div>\n<\/div>\n<div class=\"bcl-offer bcl-offer-sm\">\n<div class=\"bcl-offer-h\"><span class=\"bcl-offer-ic\"><svg class=\"bcl-ic\" viewBox=\"0 0 24 24\" aria-hidden=\"true\" fill=\"none\" stroke=\"currentColor\" stroke-width=\"1.8\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><path d=\"M8 21h8M12 17v4M7 4h10v5a5 5 0 0 1-10 0V4z\"\/><path d=\"M7 6H4v1a3 3 0 0 0 3 3M17 6h3v1a3 3 0 0 1-3 3\"\/><\/svg><\/span><\/p>\n<div><small>Learn and earn<\/small><b>Free tournaments every day \u2014 your way to USDT prizes<\/b><\/div>\n<\/div>\n<p>Entry is free and you trade on a demo account, so you need no money of your own. Free tournaments pay out Tour Passes, and those get you into tournaments with USDT prizes. The best go further \u2014 to a $5,000 funded account.<\/p>\n<div class=\"bcl-offer-btns\"><a class=\"bcl-btn gold\" href=\"https:\/\/buycrypt.com\/tournaments\"><svg class=\"bcl-ic\" viewBox=\"0 0 24 24\" aria-hidden=\"true\" fill=\"none\" stroke=\"currentColor\" stroke-width=\"1.8\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><path d=\"M8 21h8M12 17v4M7 4h10v5a5 5 0 0 1-10 0V4z\"\/><path d=\"M7 6H4v1a3 3 0 0 0 3 3M17 6h3v1a3 3 0 0 1-3 3\"\/><\/svg>Join for free<\/a><a class=\"bcl-btn ghost\" href=\"https:\/\/buycrypt.com\/tournaments-guide\">How tournaments work<\/a><\/div>\n<\/div>\n<\/div>\n<section class=\"bcl-faq\">\n<h2 id=\"bcl-faq\">FAQ<\/h2>\n<details>\n<summary>Can you make money on NFTs in 2026?<\/summary>\n<p>There are no guarantees, and since 2022 most collections have been trading far below their peaks. Treat NFTs as an illiquid, high-risk asset, and think of a purchase first and foremost as a way to join a community or to use the token itself.<\/p>\n<\/details>\n<details>\n<summary>If I buy an NFT, can I print the image on T-shirts?<\/summary>\n<p>Only if the collection&#039;s license allows it. Owning a token doesn&#039;t transfer the copyright on its own, so read the terms on the project&#039;s website.<\/p>\n<\/details>\n<details>\n<summary>What happens to my NFT if the marketplace shuts down?<\/summary>\n<p>The token itself stays at your address on the blockchain, and you can sell it on another marketplace. The real risk lies elsewhere: if the metadata was stored on the project&#039;s server and the project has shut down, the image may stop displaying.<\/p>\n<\/details>\n<details>\n<summary>How is an NFT different from a regular token like USDT?<\/summary>\n<p>Regular tokens are fungible: any USDT equals any other. Every NFT is unique and has its own number in the collection&#039;s smart contract.<\/p>\n<\/details>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>What is an NFT in simple terms: how non-fungible tokens work, where the image is stored, what happened to the market after the boom and how not to lose money.<\/p>\n","protected":false},"author":1,"featured_media":54500,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"rank_math_title":"What Is an NFT? How NFTs Work and Their Risks","rank_math_description":"What is an NFT in simple terms: how non-fungible tokens work, where the image is stored, what happened to the market after the boom and how not to lose money.","rank_math_focus_keyword":"what is an NFT","_forpost_external_id":"","_seorun_article_id":"","footnotes":""},"categories":[16352],"tags":[],"class_list":["post-54373","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-crypto-school","resize-featured-image"],"lang":"en","translations":{"en":54373,"ru":20074,"uk":54651},"pll_sync_post":[],"_links":{"self":[{"href":"https:\/\/buycrypt.com\/blog\/wp-json\/wp\/v2\/posts\/54373","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buycrypt.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buycrypt.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buycrypt.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buycrypt.com\/blog\/wp-json\/wp\/v2\/comments?post=54373"}],"version-history":[{"count":2,"href":"https:\/\/buycrypt.com\/blog\/wp-json\/wp\/v2\/posts\/54373\/revisions"}],"predecessor-version":[{"id":54581,"href":"https:\/\/buycrypt.com\/blog\/wp-json\/wp\/v2\/posts\/54373\/revisions\/54581"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buycrypt.com\/blog\/wp-json\/wp\/v2\/media\/54500"}],"wp:attachment":[{"href":"https:\/\/buycrypt.com\/blog\/wp-json\/wp\/v2\/media?parent=54373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buycrypt.com\/blog\/wp-json\/wp\/v2\/categories?post=54373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buycrypt.com\/blog\/wp-json\/wp\/v2\/tags?post=54373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}