Non-fungible token

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A non-fungible token is a unique digital identifier that cannot be copied, substituted, or subdivided, that is recorded in a blockchain, and that is used to certify ownership and authenticity. An NFT, or non-fungible token, is an indivisible digital asset whose ownership is registered on the blockchain. Unlike cryptocurrencies, NFTs cannot be duplicated, replaced, or divided into smaller parts. They can be bought, sold, and exchanged, with their ownership transferred by the current owner. Creating an NFT doesn't usually require advanced coding skills; anyone can make one. Typically, NFTs reference digital content like artworks, photos, videos, or audio files. Their uniqueness sets them apart from fungible cryptocurrencies. The blockchain records ownership of an NFT, enabling owners to transfer them, facilitating their sale and trade. Anyone can create NFTs, often without needing extensive coding skills.

Advocates argue that NFTs offer a public declaration of authenticity or ownership proof, yet their legal implications remain unclear. While blockchain-defined NFT ownership lacks inherent legal significance and doesn't automatically confer copyright or other intellectual property rights to the associated digital content. NFTs don't limit the sharing or replication of their linked digital files and don't hinder the creation of NFTs referencing identical content

In 2021, the trading volume of NFTs surged to $17 billion, a notable increase from the previous year's $82 million. [1]. NFTs garnered attention as speculative investments, but faced criticism due to the environmental impact of certain blockchain technologies, alongside concerns about fraudulent activities in the art sector. [2]. Some analysts likened the NFT market to a potential economic bubble or Ponzi scheme. At its peak, the primary NFT platforms included Ethereum, Solana, and Cardano


An NFT, stored within a blockchain, represents a data file that is marketable and exchangeable.[3]. The NFT has the capability to link to a specific asset, whether digital or physical, ranging from images and artwork to music or recordings of sports events. [4]. It could potentially grant permissions or licensing rights for the utilization of the asset according to predetermined conditions. [5]. Both the NFT itself and, if applicable, the accompanying license allowing usage, reproduction, or display of the underlying asset, are exchangeable and vendible across digital marketplaces. [6]. Yet, the informal nature of NFT transactions typically leads to a transfer of asset ownership lacking legal enforcement,[13] often offering little beyond serving as a symbol of status.

NFTs operate similarly to cryptographic tokens, yet unlike cryptocurrencies, they typically lack interchangeability, making them non-fungible. A non-fungible token includes data links, such as references to storage locations of associated art, which could be susceptible to link degradation or decay, known as link rot. [7]


Digital art

Digital art is a common use case for NFTs.[8]. Notable auctions featuring NFTs connected to digital art have captured significant public interest, with the inaugural prominent house auction occurring at Christie's in 2021. [9]. The piece called Merge, created by artist Pak, fetched the highest auction price for an NFT, reaching a value of $91.8 million [10] and Everydays: the First 5000 Days, by artist Mike Winkelmann (known professionally as Beeple) the second most expensive at US$69.3 million in 2021.

Several high-profile instances have brought attention to NFTs linked with digital art. Notable examples include the sale of a Banksy artwork burnt and turned into an NFT by Injective Protocol, sparking controversy. However, skepticism exists within the art community regarding the cultural significance of NFTs, drawing parallels to past trends like net art before the dot-com bubble. Italy temporarily banned the sale of NFT reproductions of famous artworks due to complexities and regulatory concerns. Despite the absence of a centralized authentication system, collaborations between auction houses, museums, and digital artists aim to address concerns about counterfeit digital works.

NFT marketplaces like OpenSea, Rarible, and NBA Top Shot have emerged, allowing trading of NFTs associated with digital content, from art to historic sports moments. Collaborations between platforms like Rarible and Adobe seek to enhance metadata verification and security for digital content, including NFTs. Various entities like Binance and eToro have also launched their NFT marketplaces.

Auction houses such as Sotheby's and Christie's exhibit artworks paired with their respective NFTs, both in virtual galleries and physical displays. Specific NFTs, like Mars House by artist Krista Kim, have fetched substantial amounts, such as its sale for 288 Ether in 2021 (equivalent to approximately $524,558 at that time). [11]


NFTs have extended to represent in-game assets, sparking discussions about user control versus game developer control when these assets are tradable on third-party platforms without developer permission. The response from game developers varies; while some like Ubisoft have embraced NFTs through initiatives like Ubisoft Quartz, others like Valve and Microsoft have officially prohibited their use. [12]

CryptoKitties, an early blockchain-based game, gained attention for monetizing NFTs, with some virtual cats selling for substantial amounts, contributing to a $12.5 million investment. Following its success, CryptoKitties became part of the ERC-721 standard, established in January 2018.

However, not all attempts to incorporate NFTs into gaming have been well-received. Ubisoft Quartz faced significant backlash upon announcement, with widespread criticism internally and externally. Surveys among game developers revealed that a majority showed little interest in integrating NFTs or cryptocurrency into their games.

While some luxury brands have ventured into minting NFTs for video game cosmetics, not all gaming platforms are receptive. Mojang Studios announced a ban on NFTs within Minecraft, citing conflicting values with the game's ethos of inclusive creativity and communal play.

Industry reports, like one from investment firm Morgan Stanley, forecast a potentially significant market worth of $56 billion by 2030 for NFTs in online gaming.

Music and film

NFTs are being explored for various applications within the entertainment industry. They're proposed as a way to tokenize movie scenes, creating collectible NFTs. Artists in music and film can use NFTs to claim royalties, contributing to a revenue of $25 million from artwork and songs sold as NFTs by February 2021. [13]

Musicians like 3LAU and Kings of Leon have notably leveraged NFTs, with 3LAU selling a collection of NFTs for $11.7 million to commemorate his album and Kings of Leon using an NFT to promote their release. Other artists and figures, including Lil Pump, Grimes, Shepard Fairey collaborating with Mike Dean, and Eminem, have also delved into NFTs.

In addition, a paper presented at a conference in 2019 suggested using NFTs as event tickets. This concept could allow event organizers or performing artists to receive royalties from ticket resale.

Standards in blockchains

Several blockchains have added support for NFTs since Ethereum created its ERC-721 standard. [14]

ERC-721 serves as an "inheritable" smart contract standard, enabling developers to craft contracts by replicating from a base model. It includes essential functions for monitoring the owner of a distinct identifier and facilitating asset transfers between owners. In contrast, ERC-1155 introduces "semi-fungibility," allowing a token to represent a category of interchangeable assets. [14] Another standard, ERC-1155, offers "semi-fungibility" whereby a token represents a class of interchangeable assets.[15]

Issues and criticisms

Unenforceability of copyright

NFT contents are easily accessible to the public, allowing straightforward copying of referenced files. However, owning an NFT on the blockchain doesn't inherently grant legal rights to the associated file's intellectual property.

Downloading NFT images through web browsers, such as using a right-click menu, is a common practice, drawing criticism from NFT supporters as a 'right-clicker mentality.

Collectors often attribute value to purchased NFTs as a status symbol, showcasing their ability to afford such acquisitions, compared to unpurchased copies of the original asset. [16]

Storage off-chain

NFTs representing digital art typically avoid storing the actual artwork file on the blockchain due to its substantial size and the limited processing capabilities of blockchains. Instead, these tokens operate akin to ownership certificates, containing a web address directing to the specific artwork. However, this setup exposes the art to potential link degradation, commonly known as link rot.


In January 2022, reports surfaced indicating that certain NFTs were being used by sellers to unintentionally collect users' IP addresses. This exploit takes advantage of the off-chain aspect of NFTs, where a user's device automatically accesses a web address embedded in the NFT to showcase the content. The server at this address can log the user's IP address and, in certain instances, modify the displayed content accordingly. OpenSea is particularly susceptible to this vulnerability due to its allowance of linking HTML files. [17]


  1. "NFTs Hit $17B In Trading in 2021, Up 21,000%" (in en-US). March 10, 2022. 
  2. Genç, Ekin (October 5, 2021). "Investors Spent Millions on 'Evolved Apes' NFTs. Then They Got Scammed.". 
  3. Wilson, Kathleen Bridget; Karg, Adam; Ghaderi, Hadi (October 2021). "Prospecting non-fungible tokens in the digital economy: Stakeholders and ecosystem, risk and opportunity". Business Horizons 65 (5): 657–670. doi:10.1016/j.bushor.2021.10.007. 
  4. "Popular NFT Use Cases In 8 Different Industries To Follow" (in en-US). April 26, 2023. 
  5. Dean, Sam (March 11, 2021). "$69 million for digital art? The NFT craze, explained". Los Angeles Times. 
  6. Kastrenakes, Jacob (March 11, 2021). "Beeple sold an NFT for $69 million". 
  7. Kastrenakes, Jacob (March 25, 2021). "Your Million-Dollar NFT Can Break Tomorrow If You're Not Careful". The Verge. 
  8. Patterson, Dan (March 4, 2021). "Blockchain company buys and burns Banksy artwork to turn it into a digital original". CBS News. 
  9. Damiani, Jesse (1 March 2021). "SuperRare And Verisart Announce '10x10' NFT Auction Series Featuring Neïl Beloufa, Petra Cortright, Shepard Fairey, And More". 
  10. "Pak Breaks Record for Most Expensive NFT Sale". December 7, 2021. 
  11. "Krista Kim's Mars House is 'first NFT digital house' to be sold over $500,000" (in en). 
  12. Alexander, Cristina (October 15, 2021). "Is Heroes & Empires free to play?". Gamurs. 
  13. Stassen, Murray (March 12, 2021). "Music-related NFT sales have topped $25m in the past month" (in en). 
  14. 14.0 14.1 "EIP-721: ERC-721 Non-Fungible Token Standard" (in en). 
  15. "EIP-1155: ERC-1155 Multi Token Standard" (in en). 
  16. Gault, Matthew (November 3, 2021). "What the Hell Is 'Right-Clicker Mentality'?". 
  17. Cox, Joseph (January 27, 2022). "This NFT on OpenSea Will Steal Your IP Address" (in en).