NFTs and Digital Ownership
NFTs represent unique items on-chain, enabling verifiable provenance for art, collectibles, gaming assets, and credentials. You'll understand what you actually own and the risks involved.
Who Is This For?
- •Creators and collectors exploring NFTs
- •Beginners curious about what makes NFTs different from tokens
Learning Objectives
- 01Explain why NFTs are non-fungible and how ownership is tracked
- 02List major NFT use cases and marketplaces
- 03Identify risks around storage, royalties, and liquidity
Non-Fungibility Explained
The “NF” in NFT stands for “non-fungible”—meaning each token is unique and not interchangeable with another. This is the core property that enables digital ownership.
🔄 Fungible vs Non-Fungible
Fungible Assets
Each unit is identical and interchangeable. Trading one for another changes nothing.
- • Dollar bills (any $1 = any other $1)
- • Gold bars (1oz = any other 1oz)
- • Gallons of gasoline
- • ETH (1 ETH = any other 1 ETH)
- • USDC (all identical)
- • Any ERC-20 token
🔬 What Do You Actually Own?
An NFT has multiple components. Understanding each helps you know what you're really buying:
The Token
✓ You definitely own this partThis is what makes the NFT an NFT. It's the proof of ownership recorded immutably on-chain.
Use Cases and Examples
NFTs aren't just JPEGs. They're being used across art, gaming, music, ticketing, and more.
🎯 Explore Use Cases
Digital Art
One-of-a-kind or limited edition digital artworks with provable ownership and provenance.
Benefits
- ✓ Provable scarcity
- ✓ Artist royalties on resale
- ✓ Global market access
- ✓ Transparent ownership history
Challenges
- ! Copyright vs token ownership confusion
- ! Art stored off-chain may disappear
- ! Highly speculative market
🏪 NFT Marketplaces
| Marketplace | Chain | Focus | Royalties | Fees |
|---|---|---|---|---|
| OpenSea | Multi-chain | General marketplace | Optional (0-10%) | 2.5% |
| Blur | Ethereum | Trading/flipping | Optional | 0% |
| Magic Eden | Multi-chain | Solana-first, gaming | Enforced option | 2% |
| Rarible | Multi-chain | Creator-friendly | Supported | 1% |
| Foundation | Ethereum | Curated art | 10% enforced | 5% |
⚠️ Royalty Warning: Creator royalties are NOT guaranteed. Some marketplaces (like Blur) made them optional to attract traders. Always check marketplace policies.
Risks and Practicalities
NFTs come with unique risks. Understanding storage, ownership limitations, and market dynamics helps you make better decisions.
💾 Where Is Your NFT Actually Stored?
The token is on-chain, but the image/media usually isn't. Storage method affects permanence:
IPFS
Decentralized file storage where content is addressed by its hash. Files persist as long as at least one node hosts them.
- • Files can disappear if no one pins them
- • Need pinning services (Pinata, Infura)
- • Hash changes if content changes
Liquidity Risk
Many NFT collections have few buyers. You might own something “worth” $10K but find no one willing to buy it.
Rights Confusion
Owning an NFT rarely means owning copyright. You can't legally sell prints unless the project explicitly grants that right.
Smart Contract Risk
Bugs in NFT contracts can lock assets or enable exploits. Always check if contracts have been audited.
Before Buying, Check:
Common Mistakes & Gotchas
NFTs have unique pitfalls. Avoid these common misconceptions:
⚠️ Golden Rule: Never spend more on an NFT than you're willing to lose 100%. Most NFT collections trend toward zero over time. Only a tiny fraction retain long-term value.
Knowledge Check
Let's see how well you understand NFTs and digital ownership.
What makes an NFT different from an ERC-20 token?
Name two popular NFT marketplaces:
Why can NFT liquidity be low?
Where is NFT image data typically stored?
Does owning an NFT automatically give you copyright?