ASSETS5 min read

What are NFTs?

Name: Awarizon SDK
Author: Awarizon

Unique digital ownership recorded permanently on blockchain

NFT stands for Non-Fungible Token. Where regular cryptocurrency is interchangeable (one Bitcoin equals any other Bitcoin), each NFT is completely unique. Ownership of each NFT is permanently recorded on a blockchain.

Fungible vs Non-Fungible — what does it mean?

"Fungible" means interchangeable. A ₦1000 note is fungible — you can swap it for any other ₦1000 note and you still have exactly ₦1000. One Bitcoin equals any other Bitcoin. These are fungible assets.

"Non-fungible" means unique and not interchangeable. A painting is non-fungible — the original Mona Lisa is categorically different from any copy. A house is non-fungible — 5 Victoria Island and 5 Ikoyi are different properties.

NFTs apply this concept to digital files. Each NFT has a unique identifier on the blockchain that proves it is distinct from all other tokens. The ownership record is permanent and publicly verifiable.

◆Digital art and collectibles (the original use case — CryptoPunks, Bored Apes)
◆Music and video — artists sell directly to fans without labels
◆Gaming items — in-game skins, weapons, land that players truly own
◆Domain names — ENS (.eth) domains as NFTs
◆Event tickets — with built-in royalties to creators on resale
◆Memberships — token-gated access to communities or content
◆Real estate deeds — tokenized property ownership
◆Loyalty points — airline miles, reward points as tradeable NFTs

The NFT itself is not the digital file (the image, video, music). It is the proof of ownership recorded on the blockchain. The file is usually stored separately — on IPFS (a decentralized file network) or sometimes on a regular server.

Think of it like this: owning an NFT is like owning the certificate of authenticity for a painting. The painting (file) might hang in a gallery or be on display publicly, but the certificate proves who owns the original.

⚠The metadata problem

If an NFT's image is stored on a centralized server (not IPFS), the company hosting it could delete or change the image. When evaluating NFTs, check where the metadata is stored. "On-chain" metadata is most permanent.

NFTs derive value from the same factors as any collectible: scarcity, provenance, and utility.

◆Scarcity — A collection with 10 NFTs is rarer than one with 10,000
◆Provenance — Blockchain proves the history of ownership. A verified original from a famous artist is worth more than a copy.
◆Utility — NFTs that unlock real-world benefits (event access, royalty shares, gaming items) have functional value beyond speculation.
◆Community — Being part of an exclusive holder community can have social and networking value.

⚠Market cycles

The NFT market is highly volatile and largely speculative. Many NFT collections have lost 90%+ of their value. Utility and long-term community are stronger foundations for value than hype alone.

KEY TERMS GLOSSARY

ERC-721

The Ethereum token standard for NFTs. Each token has a unique ID.

ERC-1155

A token standard that supports both fungible and non-fungible tokens in one contract — used in gaming.

Minting

The process of creating a new NFT on the blockchain.

Metadata

The data describing an NFT — name, description, image URL, attributes.

IPFS

InterPlanetary File System. A decentralized network for storing NFT files permanently.

Royalties

A percentage of secondary sales automatically paid to the original creator via smart contract.

What are NFTs?

Fungible vs Non-Fungible — what does it mean?

What is Blockchain?

What is a Smart Contract?

What are Real World Assets (RWA)?