Most Frequently Asked Questions About NFTs (Non-Fungible Tokens)

NFTs revolutionized digital ownership and sparked intense debate across the tech and art worlds. While the hype may have cooled slightly, their fundamental technology—blockchain-based verifiable scarcity—remains crucial for the future of the digital economy. If you’re still trying to grasp the basics, here are the most common questions we receive about Non-Fungible Tokens.

What Exactly is an NFT?

An NFT stands for Non-Fungible Token. To understand this, we must first understand "fungibility." Fungible assets (like the dollar bill or Bitcoin) are mutually interchangeable; one unit is identical to another. Non-fungible assets, conversely, are unique and cannot be swapped on a one-to-one basis because they possess distinct properties.

An NFT is essentially a unique digital certificate of ownership stored on a blockchain (often Ethereum, Solana, or Polygon). This certificate points to a specific digital or physical asset—be it a piece of digital art, a collectible, a virtual land parcel, or a music file. The NFT itself is the proof of ownership, not necessarily the artwork itself.

If I Buy an NFT, Do I Own the Copyright?

This is one of the biggest misconceptions. Generally, no. When you purchase an NFT, you are buying the token (the certificate of authenticity and ownership record) linked to the asset. Unless explicitly stated in the smart contract or terms of sale, the underlying copyright and intellectual property (IP) usually remain with the original creator.

What you typically receive is:

• The ownership of the token.
• The right to display the art for non-commercial purposes.
• In some rare cases (like the Bored Ape Yacht Club), limited commercial usage rights may be granted.

How Are NFTs Created (Minted)?

The process of creating an NFT is called "minting." Minting is the act of publishing a unique token onto the blockchain. This process involves executing a smart contract that writes the token’s metadata (details like the creator, the link to the media file, and its unique ID) onto the decentralized ledger. The necessary steps usually involve:

1. Choosing a blockchain platform (e.g., Ethereum).
2. Using an NFT marketplace (like OpenSea or Foundation) or a dedicated minting platform.
3. Paying a transaction fee (known as "gas") to cover the computational energy required to process and validate the transaction on the network.

What Is the Role of Smart Contracts in NFTs?

Smart contracts are the backbone of NFTs. A smart contract is self-executing code stored on the blockchain that automatically executes actions based on predefined conditions. For NFTs, the smart contract defines:

• The metadata and unique identifier of the token.
• The rules for ownership transfer.
• Crucially, the automatic payment of creator royalties upon every subsequent resale.

Can NFTs Be Used for More Than Just Digital Art?

Absolutely. While digital art captured early attention, the true potential of non-fungibility extends far beyond:

• Gaming: In-game assets, character skins, and virtual land (Metaverse).
• Ticketing: Verifiable, tamper-proof event tickets.
• Real Estate: Fractionalized ownership or deed verification.
• Music: Distributing streaming rights or exclusive fan access.
• Identity: Digital passports, certifications, or academic degrees.

Are NFTs Environmentally Harmful?

Early criticisms correctly highlighted the environmental impact of certain blockchains, particularly Ethereum, which historically used a Proof-of-Work (PoW) consensus mechanism that required massive computational energy.

However, the landscape has changed significantly. Following the "Merge" in late 2022, Ethereum transitioned to Proof-of-Stake (PoS), dramatically reducing its energy consumption (by over 99%). Furthermore, many popular NFT platforms now utilize eco-friendlier PoS blockchains like Solana, Polygon, and Tezos, largely addressing the initial energy concerns.

How Do I Keep My NFTs Safe?

NFTs are secured by cryptography, but their safety depends entirely on how you manage your private keys. The greatest risks come from user error and phishing:

• Use a Hardware Wallet: Store your private keys offline using devices like Ledger or Trezor.
• Never Share Your Seed Phrase: Your 12- or 24-word seed phrase is the master key to your funds. Anyone who possesses it owns your assets.
• Be Wary of Links: Scammers often use malicious links or fake marketplaces to trick you into approving transactions that drain your wallet. Double-check URLs before connecting your wallet.