NFTs Explained

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KoinGuide Team

Last Updated: June 2025

More than just digital art - understanding the full potential of NFTs

What Are NFTs?

NFTs (Non-Fungible Tokens) are unique digital assets verified using blockchain technology. Unlike cryptocurrencies, each NFT is one-of-a-kind and cannot be exchanged on a like-for-like basis.

Key Point: “Non-fungible” means irreplaceable and unique. While Bitcoin is fungible (one Bitcoin equals another), each NFT has distinct characteristics that make it special.

How NFTs Work

Digital Ownership

NFTs provide verifiable proof of ownership for digital assets. The blockchain acts as a permanent record, showing who owns what and when it was transferred.

Smart Contracts

NFTs are powered by smart contracts that define their properties, ownership rules, and can even include royalties for creators on future sales.

Metadata

NFTs contain metadata that describes the asset – its name, description, image, and other attributes that make it unique and valuable.

Interoperability

NFTs can be used across different platforms and applications, creating a connected ecosystem where assets have utility beyond their original purpose.

Types of NFTs

Digital Art & Collectibles

The most common type of NFT, including digital paintings, illustrations, and collectible avatars.

Examples: Bored Ape Yacht Club, CryptoPunks, Art Blocks

Gaming Assets

In-game items, characters, weapons, and virtual land that can be owned and traded across games.

Examples: Axie Infinity, The Sandbox, Decentraland

Music & Audio

Songs, albums, concert tickets, and exclusive audio content that fans can own and trade.

Examples: Royal, Async Music, OneOf

Utility NFTs

NFTs that provide access to services, communities, or special privileges beyond just ownership.

Examples: Membership passes, Event tickets, Domain names

Real-World Applications

Identity & Credentials

• Digital identity verification
• Academic certificates
• Professional credentials
• Medical records

Creator Economy

• Direct artist-to-collector sales
• Automatic royalty payments
• Global marketplace access
• Community building around art

Virtual Worlds

• Virtual real estate ownership
• Digital fashion and avatars
• Virtual event tickets
• Metaverse assets

Business Use Cases

• Supply chain tracking
• Intellectual property protection
• Membership programs
• Brand engagement

How to Get Started with NFTs

Step 1: Set Up a Wallet

Get a cryptocurrency wallet like MetaMask that supports NFTs. Fund it with ETH or the native currency of your chosen blockchain.

Step 2: Choose a Marketplace

Popular marketplaces include OpenSea, Rarible, and Foundation. Each has different features, fees, and communities.

Step 3: Research Before Buying

Look at the creator’s reputation, the project’s roadmap, community size, and utility of the NFT before making a purchase.

Step 4: Start Small

Begin with smaller purchases to understand the market and technology before investing significant amounts.

Important Considerations

Things to Remember

• NFT markets can be highly volatile
• Environmental impact varies by blockchain
• Ownership doesn’t always mean copyright
• Storage and preservation challenges

Future Potential

• Integration with social media
• Enhanced gaming experiences
• Digital identity solutions
• New creator monetization models