What Is an NFT? A Plain-English Explanation

What is an NFT? An NFT (non-fungible token) is a unique token on a blockchain that records who owns a specific item, usually a piece of digital art, a collectible or an in-game item. The token lives in your crypto wallet, and the blockchain keeps a public record of who has held it. This guide explains NFTs for beginners in plain words, with no hype and no promises: some NFTs hold value, many don't, and it's always worth checking the facts yourself.

What does "non-fungible" mean?

Non-fungible means one-of-a-kind and not swappable like for like. A pound coin is fungible, because any pound coin is worth the same as any other. A concert ticket for a named seat is closer to non-fungible, because each one is different.

Each NFT has its own ID number inside its collection's smart contract, so no two are identical, even if the pictures look alike.

How does an NFT actually work?

An NFT works through a smart contract, a small program on a blockchain that creates the tokens and tracks who owns each one. When an NFT is created (minted), the contract records a new token ID and the wallet that holds it. When it's sold or sent, the contract updates the record.

The token is the entry in the contract: an ID number and an owner.
The metadata is a small file the token points to, with the name, description and a link to the image.
The image or media is usually stored off the main chain, often on a decentralised storage network.

Because the record is public, anyone can look up a token's history on a block explorer. Our Reading a Smart Contract guide shows you how.

What do you own when you buy an NFT?

When you buy an NFT you own the token, meaning the blockchain record that your wallet holds that item. You don't automatically own the copyright to the art.

What you can do with the image depends on the licence the creator chose. Some allow personal use only, some give holders commercial rights, and some are CC0, meaning anyone can use the art freely. Our CC0 Explained guide covers that last option.

Why can't I just copy the picture?

You can copy the picture, but you can't copy the token. A screenshot is just a file; the NFT is the verifiable record of ownership that sits on the blockchain.

It's a little like a signed print versus a poster of the same artwork. Anyone can have the poster, but only one person holds the signed original, and in this case the proof is public.

Where are NFTs bought and sold?

NFTs are bought and sold on NFT marketplaces, websites that connect to your wallet and let you mint, list and buy tokens. Each marketplace supports certain blockchains and charges its own fees.

You'll need a crypto wallet and a little of the network's coin to pay transaction fees (called gas). Look after your wallet's recovery phrase above all else; our Wallet Safety Basics guide explains why.

A worked example: an NFT on Liquid NFTs

Liquid NFTs is a marketplace where part of each mint price is held as liquidity inside the NFT itself, in a stablecoin called FUSD. At the time of writing, Liquid's official About page says at least 50% of each new mint goes to that NFT's liquidity, and a share of platform fees is spread across existing NFTs on the platform. Liquid runs on several chains, including Polygon.

That makes a Liquid NFT a handy example, because you can see more than just the owner:

The owner, shown on the contract like any NFT.
The liquidity it holds, readable on-chain.
What redeeming would return, after the fees listed on Liquid's About page.

ANON NFTs is one of the collections on Liquid, alongside many others such as Liquid Apes. You can browse every ANON collection on our Collections page, look up individual NFTs in the Collection Explorer, and check any Liquid NFT's backing with the Backing Checker. Figures change, so always check it on-chain rather than relying on any screenshot, including ours.

Are NFTs safe?

NFTs are as safe as the wallet holding them and the care you take before buying. The technology itself is public and checkable, but scams are common.

Only use official links, and check the contract address before you mint or buy.
Never share your recovery phrase or sign a wallet pop-up you don't understand.
Only spend what you're comfortable losing, because prices can fall and some NFTs never resell.

Our guides on checking a collection before buying and spotting a rug pull go into more detail.

Quick questions

What does NFT stand for?
Non-fungible token: a unique token that can't be swapped like for like.

Is an NFT just a JPEG?
No. The image is usually linked to the token, but the NFT itself is the ownership record on the blockchain.

Do I need crypto to own an NFT?
Usually you need a crypto wallet and a little of the network's coin to cover transaction fees.

Can an NFT lose value?
Yes. Prices go up and down, and many NFTs never resell, so nothing about an NFT's price is guaranteed.

Where can I learn the jargon?
Our NFT Glossary explains common terms in plain words, and the NFT FAQ answers more beginner questions.

Check it yourself

The best thing about an NFT is that you don't have to take anyone's word for it. Our guide to checking backing on-chain shows you how to read the record straight from the blockchain.