What are Non Fungible Tokens (NFTs)? Beginner Guide


A token is a central term in the sense of blockchain and cryptocurrency. Tokens are available in various types, created on different blockchain networks, and are used for a number of purposes. With its specific characteristics and implementations, NFT is one of the kinds of tokens.

NFT is the next new hype in the crypto market after Decentralized Finance (DeFi). Traders and investors are talking about NFT and their potential in the coming future,

In this article, we will provide you with a detailed guide on the Non Fungible Tokens (NFT). Let’s start 🙂

In this Article:

  • NFT Background
  • What are Non-Fungible Tokens (NFT)?
  • Fungible Vs Non-Fungible Tokens
  • How are Non-Fungible Tokens used?
  • How do NFTs work?
  • NFT Applications
  • NFT Limitations
  • NFT Pros and Cons
  • The future
  • Conclusion

NFT Background

The word fungible implies something that can be replaced by something identical. So, we can easily understand by the name Non Fungible Tokens that we are talking about a type of token that can’t be substituted by another similar token. It is distinctive and it is non-interchangeable.

Witek Radomski, the co-founder of Enjin Coin, developed the first non-fungible token when he wrote the code for the first NFT back in June 2017. However, two months later, in August, the code was released to the public.

What is a Non-Fungible Token (NFT)?

non fungible tokens (NFT)

NFT is a type of token that is distinct from each other and cannot be interchanged. In certain ways, this attribute makes it distinct and attractive. It is a virtual token made by cryptography, to verifiably prove the validity and ownership of an object.

A non-fungible token (NFT) is a type of cryptographic token that refers to a specific object on a blockchain. This can either be completely digital assets or real-world assets with tokenized versions. As NFTs are not identical to each other, they may act within the digital domain as evidence of authenticity and ownership.

Fungible Vs Non-Fungible Tokens

There are some major differences between Fungible and Non Fungible tokens. These can be listed as below:

1) Interchangeable: The Fungible tokens can be exchanged to the other token of the same type whereas the Non Fungible tokens cannot be replaced.

2) Uniform: All the Fungible tokens are identical in specification. However, each Non Fungible token is unique and different.

3) Divisible: The Fungible tokens are divisible into smaller units whereas Non Fungible tokens cannot be divided.

4) ERC standard: The Fungible tokens are ERC-20 standard whereas the Non Fungible tokens are ERC-721 standard.

What are Non Fungible Tokens (NFTs)? Beginner Guide 1

How do NFTs work?

Different mechanisms exist for generating and issuing NFTs. ERC-721, a protocol for issuing and exchanging non-fungible assets on the Ethereum blockchain, is the most popular of these. ERC-1155 is a more recent, enhanced standard. It makes it possible to include both fungible and non-fungible tokens in a single contract, opening up a whole new set of possibilities.

In open markets, like OpenSea, NFTs can be traded. Such markets connect buyers with sellers, and each token’s value is unique. Naturally, in response to market supply and demand, NFTs are vulnerable to price changes.

A higher level of interoperability enables the standardization of the issuance of NFTs, which eventually benefits the consumers. It essentially implies that specific assets can be shared with relative ease between various applications.

How are Non-Fungible Tokens used?

Decentralized apps (DApps) may use NFTs to issue specific digital objects and crypto-collectibles. Either a collectible object, an investment product, or anything else can be these tokens. As many online games have already had their own economies, it makes it possible to use blockchain to tokenize gaming properties.

How to Promote NFT

In reality, using NFTs could theoretically solve or reduce the popular inflation problem that many games have. Although virtual worlds are already thriving, the tokenization of real-world assets is another exciting use of NFTs.

These NFTs can represent fractions of assets in the real world that can be stored and exchanged on a blockchain as tokens. Digital identity is also a market that can take advantage of the tools of NFTs. Storing blockchain identity and ownership data will improve the privacy and integrity of data for many individuals around the world.

NFT Pros and Cons


  • In games, sports, arts, and technology, they could unlock new revenue sources.
  • The ERC-721 standard can be a way to tokenize any major asset.
  • For the very first time, NFTs could introduce millions of individuals to cryptocurrencies.
  • They can change our ownership behaviors and make it possible to own an asset in the real world that is thousands of miles away.


  • It can be tricky and time-consuming to create decentralized applications for non-fungible tokens.
  • A lot more simplification is needed to make it easy for individuals who know nothing about blockchain to use NFTs.
  • In the hope of selling it on for a profit, players buy an asset, but if the market crashes, they will make a nasty loss.
  • ERC-721 is still relatively new to the token norm.
  • Up to a certain point, fungible tokens are divisible. ERC-721 clearly cannot be broken and must be purchased or sold in its entirety.

NFT Applications

Non-fungible tokens are used today in a number of ways, and many NFT examples can be found, such as:

1) Gaming: The ownership of in-game properties has generated value for the players of the game using Non Fungible Tokens. By selling your Non-Fungible Tokens, you can sell your in-game properties in the games for a profit. For the gaming industry, Non-Fungible Tokens opened a gate of opportunities and has added to its annual revenue and growth. People can now own, purchase, and sell their game characters by using NFT.

2) Collectibles: One of the most common examples of NFTs is the use of these tokens to keep digital assets in your name. You can create an NFT for any digital asset to make it unique, and as your virtual asset. NFT provides unquestionable possession of all in-game properties and virtual products in plain terms.

3) Licensing: Using it for software licensing is another perfect example of the productive use of NFT. It can minimize piracy by creating NFT-based licenses and encourage individuals to sell their licenses for even profit on the open market. Users may also skip annual subscriptions, use software against the purchased license, and sell it to someone else after using it.

NFT Limitations

Non-fungible tokens however find some of the limitations which can be listed as below:

1) Legal Concerns: Legal frameworks differ depending on the country, so it is important to create a global norm to tokenize art to take local legislation into account.

2) Public resistance to digital art: In spite of their popularity, crypto-collectibles draw only a tiny audience of crypto-enthusiasts. For art pieces, one of the main components are the users may either listen to it or look at it privately to enjoy it.

3) Lack of accessibility for retail users: For retail users, NFTs lack basic functionality as they are a backend part and do not have a user-friendly interface.

The Future

Mainly, in gaming and crypto collectibles, non-fungible tokens are implemented. Non-fungible tokens can be used for gaming, potentially allowing them to be ported to new games or shared with other players. With the future application of copyright and intellectual property rights, ticketing, and video game sales and trading, however, their potential is much wider.

Non-fungible tokens, the tokenization of both digital and real-world resources, add potential to the generation of security tokens. Physical properties like land may be tokenized for fractional or mutual ownership. Certification, such as qualifications, software licencing, warranties, and even birth and death certificates, could be further use of non-fungible tokens.


As an evolving phenomenon, NFTs have been evaluated as a key building block for a blockchain-based ticketing framework for events. NFTs may help resolve the current shortcomings of existing ticketing systems for non-blockchain activities.

These include activities such as vulnerability to fraud, lack of control over secondary market transactions and ownership confirmation. NFTs have the ability to be a crucial part of not only the blockchain community, but the broader economy, by representing real assets in the digital environment.