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NFT (Non-Fungible Token)

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NFT (Non-Fungible Token)

A non-fungible token (NFT) is a blockchain token where each unit has a unique identifier — distinguishing it from all others in its collection and proving provenance and ownership on a public, immutable ledger.

Fungible: 1 ETH = any other 1 ETH (interchangeable) Non-fungible: CryptoPunk #7804 ≠ CryptoPunk #3100 (unique, non-interchangeable)

Technical Foundation

NFTs on Ethereum use the ERC-721 standard (proposed Jan 2018, William Entriken et al.). Each token:

  • Has a unique integer tokenId within its contract
  • Has exactly one on-chain owner at any time
  • Points to metadata (image, attributes) via tokenURI — typically stored on IPFS or Arweave
  • Can be transferred permissionlessly on open marketplaces (OpenSea, Blur, LooksRare)

ERC-1155 extends this for semi-fungible tokens — useful in gaming (100 copies of the same magic sword = 1 token ID with quantity 100; a legendary unique sword = 1 token ID with quantity 1).

See ethereum-token-standards for full technical details.

Timeline

DateEvent
Oct 2015First NFT project: Etheria (3D map tiles); demonstrated at DEVCON1
2017CryptoKitties — first mainstream NFT use; congested Ethereum network
Jan 2018ERC-721 standard formalised
2020–2021NFT boom: CryptoPunks, Bored Ape Yacht Club, art market explosion
Mar 2021Beeple’s “Everydays” — $69.3M at Christie’s; third-most-valuable living artist
2022Market crash; NFT volume declined ~90% from peak
2024+Recovery in select collections; gaming and RWA NFTs growing

Use Cases

  • Digital art and collectibles — CryptoPunks, BAYC, Azuki, Pudgy Penguins
  • Gaming — in-game items with real transferable ownership
  • Music — artists issuing songs or albums as NFTs (royalty splits via smart contracts)
  • Real-world asset tokenisation — property deeds, luxury goods provenance, event tickets
  • Domain names — ENS (Ethereum Name Service) domains are ERC-721 tokens
  • Identity and credentials — Soulbound tokens (non-transferable NFTs) for credentials/reputation

Criticisms

  • Environmental impact (pre-Merge) — resolved; Ethereum PoS uses >99% less energy
  • Speculation over utility — peak 2021 market was largely speculative; most collections collapsed
  • Metadata centralisation — if tokenURI points to a centralised server, the image can disappear
  • Wash trading — artificial volume on marketplaces inflated apparent demand

Sources: wikipedia-2026-ethereum | cryptoslate-2025-ethereum-tokens

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