NFTs are created on the blockchain, and one of their most important features is the ability to transparently and permanently prove ownership and authenticity of the asset. Each NFT has a unique identifier and specific metadata that distinguishes it from other tokens. This information is stored on the blockchain and cannot be forged or deleted. For example, if a digital image is registered as an NFT, it is possible at any time to determine who owns it, when it was created, and in which transactions it has been involved.
The Difference Between NFTs and Regular Cryptocurrencies
NFTs are technically built on the same blockchain technology that cryptocurrencies like Bitcoin and Ethereum are based on, but there are fundamental differences between the two.
Difference in Fungibility
Cryptocurrencies such as Bitcoin, Ethereum, or Tether are fungible assets, meaning each unit is exactly equal to another. For example, if you have one Bitcoin, you can exchange it for another Bitcoin without any difference in value or characteristics. However, an NFT is a non fungible asset. Each NFT has its own unique features and cannot be exchanged for another NFT of equal value.
For instance, two digital images created as NFTs may appear similar in theme, but in terms of ownership, history, and even the reputation of the creator, they are completely different and cannot be considered equal.
Difference in Use and Ownership
Cryptocurrencies are primarily used for payments, value storage, and exchange. In contrast, NFTs are mainly used to represent ownership of a specific asset. Assets that were traditionally tangible and visible, such as artworks, can now be bought, sold, and transferred digitally through NFTs.
In NFTs, ownership is immutably recorded on the blockchain, and the transfer history can be easily traced. This has made NFTs especially attractive in areas where authenticity and ownership matter, such as art, music, rare collectibles, and even academic and educational certificates.
How Do NFTs Work?
Understanding how NFTs function can help traders, buyers, and even digital content creators operate more confidently in this space. There are three main components in the functioning of NFTs: minting, transfer and storage, and smart contracts.
Minting (Creating an NFT)
Minting refers to the process through which a digital asset is converted into an NFT. In this process, data including a digital file (such as an image, music, or video), creator information, descriptions, and metadata are entered into a smart contract and recorded on the blockchain. This process is typically carried out through platforms like OpenSea, Rarible, or Foundation.
During minting, a unique identifier is generated for the asset and stored on the blockchain. This identifier represents ownership and authenticity of the digital asset and cannot be altered or deleted.
Transfer and Storage
After minting, the NFT can be bought and sold among different users. Ownership transfer is done through blockchain transactions, which are fully transparent and traceable. The new buyer of the NFT becomes the owner of that unique identifier, and this ownership is permanently recorded on the blockchain.
Assets minted as NFTs are usually not stored on the blockchain itself; instead, only their hash or address is recorded. The actual file (such as an image or video) is stored on a decentralized server like IPFS or other storage servers. This approach helps save storage space and increases speed.
Smart Contracts and Their Role
A smart contract is essentially a piece of code executed on the blockchain that governs the functioning of the NFT. This code can determine who can sell the NFT, how the revenue from sales is distributed, or even when the NFT is automatically transferred.
For example, an artist can specify that every time their NFT is sold on a secondary market, 10% of the sale proceeds should be transferred to their wallet. This feature is executed automatically and without the need for intermediaries.
Smart contracts also enhance security because all the rules for buying and selling are predefined and protected against tampering. Since these contracts reside on the blockchain, no one can change them without the mutual agreement of the parties involved.
A Brief History of NFTs
For many technology users, NFTs may seem like a new concept, but their origins date back about a decade. The emergence of this concept began with efforts to combine digital art, ownership, and blockchain technology.
Early Projects (such as Quantum)
The first known attempt to create an NFT dates back to 2014, when Kevin McCoy and Anil Dash introduced a project called Quantum. This project featured a digital animated image that was registered as a non fungible token on the Namecoin blockchain. Although there was no defined standard for NFTs at the time, Quantum demonstrated the potential for storing and transferring ownership of digital assets in a blockchain based environment. This initiative can be considered the first serious step in the development of NFTs.
The Turning Point with CryptoKitties
In 2017, a project called CryptoKitties became a milestone in the public recognition of NFTs. This blockchain based game allowed users to buy, breed, and trade unique digital cats. Each cat's characteristics were algorithmically generated, and its ownership was recorded as an NFT. CryptoKitties caused network congestion on Ethereum and proved that there was a market for non fungible digital assets.
Market Growth Since 2021
Until 2020, NFTs remained a relatively niche phenomenon, mostly confined to areas such as gaming and digital art. But in 2021, following the $69 million sale of a Beeple artwork, global attention suddenly turned toward this technology. At the same time, marketplaces like OpenSea, Rarible, and Foundation gained popularity, and everyday users began participating in NFT trading. Since then, NFTs have expanded into areas such as music, sports, collectibles, and even virtual real estate, playing a significant role in the digital economy.
Real World Applications of NFTs
Although NFTs were initially introduced as a technical innovation, they quickly found their place in digital life. Today, clear and practical examples of NFT use can be seen across various fields.
Digital Art
One of the primary and most successful applications of NFTs is in the field of digital art. By minting their works as NFTs, artists can offer them directly to audiences without the need for intermediaries like galleries or publishers. Ownership and authenticity are guaranteed via blockchain, and the artist can even earn a share of revenue from future resales. This new distribution model has created a major revolution in the art economy.
Sports Collectibles
NFTs quickly entered the world of professional sports. Digital player cards, iconic game moments, or collectible sports items are offered in NFT form. Projects like NBA Top Shot are prime examples of this trend, selling short video highlights as NFTs and giving fans the ability to own them digitally.
Video Games
NFTs have found wide application in the world of online gaming. Players can purchase and even sell items such as weapons, outfits, characters, or in game land as NFTs. These assets have real ownership and, unlike traditional games, are transferable between users. Games like Axie Infinity and Decentraland are successful examples in this area.
Virtual and Real Estate
In the metaverse, NFTs are used for buying and selling virtual land. Projects like The Sandbox and Decentraland enable users to purchase properties, construct buildings, and host virtual events. In some cases, NFTs are also used to register real estate ownership documents, which can make the transfer process more transparent and efficient.
Use in Music and Entertainment
In the music industry, NFTs allow artists to sell songs, albums, or concert tickets directly to their audience. Some well known singers have used NFTs to release limited editions of their work or to offer fans direct interaction opportunities. NFTs are also used in the film and media industries to manage publishing rights and distribution.
Advantages and Disadvantages of NFTs
As an emerging technology, NFTs come with their own unique advantages and disadvantages. Examining these aspects helps investors, artists, and users to operate in this space with greater awareness.
Among the advantages of NFTs are the ability to prove ownership, continuous revenue potential for creators, elimination of intermediaries, transaction transparency, and the creation of new markets. These tokens provide a framework where each digital asset can realize its true value and be protected from misuse.
However, there are also disadvantages, including low liquidity for many NFTs, legal uncertainties regarding ownership rights, high price volatility, high energy consumption on blockchains like Ethereum, and the lack of clear legal standards. Many users have also fallen victim to worthless projects or even scams due to exaggerated marketing.
| Advantages | Disadvantages |
| Transparent proof of ownership and asset authenticity | Low liquidity in small markets or low quality assets |
| Elimination of intermediaries and increased creator income | Lack of clear laws regarding copyright and intellectual property |
| Transaction transparency and historical traceability | High price volatility and risk of significant loss |
| Support for a decentralized economy | High energy consumption on some networks like Ethereum |
| Programmability through smart contracts | Potential for misuse and presence of unreliable projects |
How to Buy an NFT
For many beginner users, buying an NFT may initially seem a bit complicated; however, by following a few simple steps, anyone can easily enter this market and acquire their own unique digital asset. In this section, the steps for buying an NFT are explained in plain language.
Choosing the Right Wallet
The first step to entering the world of NFTs is to create a digital wallet. These wallets are used to store cryptocurrencies and NFT tokens. Popular wallet options include MetaMask, Trust Wallet, and Coinbase Wallet. These wallets are available as browser extensions or mobile apps, and you must securely store the recovery phrase (Seed Phrase) provided during setup.
Purchasing Cryptocurrency
Most NFT marketplaces are based on the Ethereum blockchain, so typically you’ll need ETH (Ethereum) in your wallet to buy an NFT. You can purchase the required amount of ETH through cryptocurrency exchanges like Binance, KuCoin, or local exchanges in your country, and then transfer it to your wallet. Keep in mind that in addition to the NFT price, you should also account for transaction (gas) fees.
Connecting to NFT Marketplaces
Once your wallet is ready and funded with cryptocurrency, the next step is to connect it to an NFT marketplace. The most well known platforms include:
- OpenSea: The largest NFT marketplace, offering a wide variety of items.
- Rarible: A decentralized marketplace with options to create and sell NFTs.
- FoundationandSuperRare: Suitable for high quality digital artworks.
To connect your wallet, simply visit the website of one of these platforms, click on the “Connect Wallet” option, and grant the necessary access to your wallet.
Steps to Purchase an NFT
After connecting to a marketplace, you can browse through different categories and select the NFT of your choice. Each token includes details such as price, creation date, ownership history, and technical specifications. By clicking on the “Buy” or “Place a Bid” option, you can initiate the purchase process, and after final confirmation, the NFT will be transferred to your wallet. All transaction details will be transparently recorded on the blockchain, and you will become the official owner of the asset.
The Future of NFTs
Despite being a relatively new phenomenon, NFTs have attracted widespread global attention. Although the market is highly volatile, current trends indicate that this technology still has significant room for growth. Below is an overview of the key development paths and future challenges facing NFTs.
Expansion of Use Cases
Currently, NFTs are mainly used in areas such as digital art, gaming, and collectibles. However, it is predicted that their application will extend to fields such as legal contracts, academic certificates, digital identity, and insurance. NFTs could play a key role in verifying authenticity and digital ownership across various sectors. For example, in the future, property deeds or educational diplomas may be issued as NFTs.
Role of Major Brands and Corporations
Global corporations and well known brands such as Nike, Adidas, Coca Cola, and even Visa have entered the NFT space. This trend indicates that NFTs are not just tools for art or collectibles, but also valuable marketing instruments and means for brand user engagement. It is expected that more brands will use NFTs to sell exclusive products, run promotional campaigns, or create unique user experiences.
Legal and Regulatory Challenges
One of the most serious barriers to the growth of NFTs is the lack of clear legal and regulatory frameworks. Issues related to copyright, identity fraud, taxation, and consumer rights are among the key concerns that must be addressed through clear and enforceable laws. In some countries, regulations for tokens are currently being drafted or reviewed, but many uncertainties still remain.
Technical Advancements (Scalability, Fees, etc.)
Many users complain about the high transaction fees on networks like Ethereum. However, with the advancement of projects such as Ethereum 2.0 and Layer 2 solutions like Polygon or Arbitrum, these issues are expected to diminish. Additionally, high scalability blockchains like Solana and Avalanche are attracting NFT projects. These technical improvements could make NFT adoption more accessible to a broader range of users.
