Getting Started: Understanding What NFTs Are from Scratch

Opening Q&A: What exactly is an NFT? Can it be used as currency?

When it comes to NFTs, many people's first reaction is “another virtual asset”, and some even ask “Is NFT a new currency?” In fact, it is not.

NFTs are not currency, but rather proof of ownership of digital assets. They are recorded using blockchain technology, capable of representing ownership of any unique item—such as a digital artwork, a virtual concert ticket, a piece of metaverse land, or a limited edition cartoon avatar. Each NFT is unique and cannot be easily copied, altered, or forged.

Non-fungibility: Understanding the Core Characteristics of NFT

To understand NFTs, one must first understand the concept of “non-fungible.”

What does homogenization mean? Imagine a hundred yuan banknote. No matter which hundred yuan banknote you take, its value is exactly the same and can be exchanged one-to-one. Currency, food, and oil are all homogeneous assets—they are standardized, can be traded on a large scale, and do not produce value differences when exchanged.

Non-fungibility goes against the grain. An authentic Picasso and a replica may look the same, but their values are worlds apart. Each piece of artwork, each antique card, and each piece of virtual real estate has its own unique attributes and historical background. The value of these items comes from their uniqueness, scarcity, and the subjective value assigned to them by collectors.

NFT brings this “non-fungible” characteristic to the digital world. Utilizing blockchain technology, any digital content can be transformed into a unique asset, with each NFT having a unique identifier and ownership record.

How do NFTs achieve immutability from an operational perspective?

NFT can become a trusted proof of ownership, and the key players behind it are blockchain and smart contracts.

Role of Blockchain: Every NFT transaction and every transfer of ownership is recorded on a decentralized ledger. This ledger is transparent, timestamped, and cannot be unilaterally tampered with. You can clearly trace the complete history of an NFT from its creation to the present—who created it, who has owned it, and what the transaction prices were. It's like equipping digital assets with a permanent “birth certificate” and “family tree.”

The Role of Smart Contracts: NFTs use standardized code to define the rules for their creation, management, and transfer. The most common standard on Ethereum is the ERC-721 standard, while on BNB Chain it is the BEP-721 standard. These standards act like the “legal framework” for NFTs, ensuring that NFTs can be recognized and circulated across different platforms.

Minting Process: The creation of an NFT is commonly referred to as “minting.” In simple terms, it is the process of converting a digital file (such as an image, a video, or a piece of music) into a digital asset on the blockchain through a smart contract. When a user purchases an NFT, they gain ownership of a unique identifier that is tied to that asset—having this identifier gives you exclusive rights to use, display, and interact with that asset.

The Grand Stage of NFTs: Which Fields Are They Changing?

Monetization of Art and Creativity

NFT art has opened a new door. Artists no longer rely on traditional galleries and auction houses; they can directly tokenize and sell their works. The key is that each piece can maintain its originality and scarcity through NFTs. Collectors buy, display, and trade these works in virtual spaces, and they can even lend them to others for exhibition. This model not only protects the rights of creators but also allows the artwork to flow.

Game Ecology Reshaping

The equipment, characters, and properties gathered in the game were previously just virtual items within the account, and players could not truly own them. However, through NFTs, in-game assets have become real, tradable digital assets. Players can trade their game achievements and equipment on the secondary market and even transfer these NFT assets between games. This has created a new economic system for the gaming ecosystem.

Decentralized Event Tickets

Event organizers can issue NFT tickets. The benefits of this approach are: ticket information cannot be tampered with, authenticity verification does not require a third party, and ticket holders can transfer their tickets directly. Moreover, NFT tickets can carry additional value—such as access to VIP areas, limited edition merchandise, exclusive digital content, etc. The tickets themselves become valuable assets.

New Collateralization Gameplay in DeFi

On some decentralized finance platforms, NFT holders can pledge their NFTs as collateral while earning interest income. Interestingly, you do not need to relinquish ownership of the NFT to profit from it—something that is difficult to achieve in traditional finance.

How did those “top-tier” NFT projects become famous?

Cryptopunks: The pioneering work of NFT

Launched in 2017, “Cryptopunks” is regarded as the “old brand” of the NFT world. This project consists of 10,000 unique 8-bit pixel art characters, each generated by an algorithm with different features and attributes. Because each one is unique, the collectible value rises accordingly. Even celebrities have used CryptoPunk characters as their social media avatars, which has become a symbol of identity. The success of this project laid the foundation for the entire digital art and NFT collectible era.

Bored Ape Yacht Club: A Victory for Community Attributes

The Bored Ape Yacht Club ( BAYC ) has different plans. 10,000 unique hand-drawn cartoon ape characters, each with its own characteristics. But its value lies not only in the artwork itself—holders can access exclusive events, visit virtual spaces, and participate in community governance. This blurs the line between “artwork” and “membership certificate,” creating a new model of NFT application.

Decentraland: Real Estate in the Virtual World

Decentraland is built on the Ethereum blockchain and is a complete virtual reality platform. Users can purchase virtual land, build virtual buildings, and host virtual events, all of which exist in the form of NFTs and can be freely traded on the platform's NFT marketplace. It is a leader in the metaverse and virtual real estate sectors.

Common Misconceptions About NFTs, Have You Fallen for Them?

Misconception 1: NFTs are completely safe and have no risks.

Although NFTs inherit the security features of blockchain, risks still exist. Phishing, smart contract vulnerabilities exploited by hackers, and the forgery or theft of NFTs are all real threats. Furthermore, due to the significant differences in the underlying blockchain ecosystems and security mechanisms of some NFTs, their security can vary greatly.

What is even more alarming is that many NFTs experience extreme price volatility and the market is highly speculative. Although some NFTs have sold for astronomical prices, long-term stability cannot be guaranteed. Like all investments, NFT investments need to be approached with caution and proper risk psychological preparation.

Misconception 2: NFT is just cryptocurrency

This is the most common confusion. NFTs and cryptocurrencies (such as Bitcoin and Ethereum) are both based on blockchain technology, but their uses and characteristics are completely different.

Cryptocurrencies are fungible. One Bitcoin can be exchanged for another Bitcoin without any difference in value. Their design goal is to facilitate transactions and value transfer.

NFTs are non-fungible. Each NFT is unique and cannot be directly exchanged one-to-one for another NFT. Their value comes from uniqueness, scarcity, and collectible value, rather than trade functionality.

Simply put: cryptocurrency is like money, and NFT is like artwork. Money can be exchanged freely, while artwork is unique and cannot be exchanged equivalently.

Summary: NFT is not a currency, but a revolution of ownership in the digital age.

NFTs have established a verifiable and immutable ownership system for digital assets through blockchain technology. They are redefining what it means to “own”—you can truly own a piece of digital art, a parcel of virtual land, or a limited edition ticket.

For creators, NFTs open up new monetization channels. For collectors, NFTs provide unique investment and display opportunities. However, like all emerging things, NFTs are also accompanied by risks such as fraud and market volatility.

The key is to recognize: NFTs are not currency and cannot be used for daily transactions, but are a new type of digital asset and proof of ownership. Understanding this is crucial to truly grasp the value of NFTs and avoid being misled by speculation.