What is an NFT? The Ultimate Guide to Non-Fungible Tokens

What are Non-Fungible Tokens NFTs
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Learn more about an industry with huge growth potential

NFTs are one of the most talked-about topics of recent times. The growing billion-dollar industry of blockchain-backed digital assets attracts major global celebrities and brands. Yet, many people either don’t understand them or completely doubt NFTs should be taken seriously. This ultimate guide will cover everything about NFTs, from what they are and how they work to how to buy and create your own, but also give you direct explanations as to why its future is much greater than the 2021 bubble.


What is an NFT?

Non-fungible tokens (or NFTs for short) are unique digital items that are issued on a blockchain such as Ethereum or Polygon. In many ways, they hold similar qualities to items in the real world.

Think about physical goods like limited-edition trainers, collectible trading cards, or the limited edition drops by clothing brands such as Supreme. Or go beyond that, an original autographed album or even a deed to a property.

All these things represent something unique and have their originality confirmed somehow, in this case, by the local law or a trademark signature. Non-fungible tokens, however, are backed up by blockchain technology – which makes their value and authenticity unquestionable.

How do NFTs work?

NFTs, at their core, are digital assets anchored securely on a blockchain network. Each NFT boasts a unique serial number called its Token ID, distinguishing it from any other asset. This unique identity is essential because, unlike fungible tokens (like bitcoin or ether), each NFT is distinct and can’t be exchanged on a one-to-one basis with another. This individuality and rarity are what often give NFTs their value.

Now, when we dive into the world of blockchains that support NFTs, Ethereum blockchain emerges as the predominant player. Its robust platform and smart contract capabilities have made it the go-to choice for many NFT creators and investors. However, as the digital landscape evolves, other blockchains such as Polygon, WAX, and even Bitcoin are carving a niche for themselves. While Ethereum is known for high-value NFTs, chains like Polygon and BNB are gaining traction, especially in the realm of gaming NFTs, primarily due to their reduced fees and faster transactions.

Once you acquire an NFT directly from the creator or secondary marketplaces, it doesn’t just float around in the digital ether. Instead, you store it in a digital wallet, much like you would with cryptocurrency. This wallet acts as a safe deposit for your digital collectibles and confirms your ownership. Thanks to the transparent and immutable nature of blockchain technology, every time an NFT changes hands, the transaction is recorded, ensuring the authenticity and originality of the NFT.

The most famous NFT projects

Even though NFT technology is still new, hundreds of thousands of NFT projects are out there. Some of the most famous NFTs in the world are part of collections launched in 2021 – the year of the first NFT bull market. These collections are tied to popular video games, famous celebrities, influencers, big fashion brands, or simply a team with fantastic community-building skills.

The graphic below showcases the top 10 NFT collections by transaction volume (combined value of all trades), as per DappRadar’s data, spotlighting names like Axie Infinity, CryptoPunks, and Bored Ape Yacht Club.

Top 10 NFT Collections by Trading Volume
Discover trending collections on the DappRadar rankings

Staying attuned to the leading collections is vital for a comprehensive understanding of NFTs’ intrinsic value. DappRadar’s NFT Rankings offer a detailed view, allowing you to gauge popularity based on transaction volume, average pricing, and other pivotal metrics.

What are NFTs for? Use cases of NFTs

Far beyond funny pictures, NFTs can be used in many different ways. Ultimately, NFTs can be digital collectibles, game items, but also concert tickets, or perhaps a digital key that unlocks a certain door. As a result, you can look at NFTs as digital contracts of ownership.

These tokens on the blockchain can prove that someone owns a certain piece of art or digital collectible, but they can also show you lifetime tickets for your favorite band. Keep reading to get to know the most important utilities for non-fungible tokens.

Digital collectibles

Digital collectibles are the most popular type of NFTs. They are the ones that got really famous back in 2021, with major collections like Bored Apes Yacht Club becoming a topic of discussion on TV everywhere. Celebrities like Justin Bieber, Madonna, Neymar, Paris Hilton, Snoop Dogg, and more have invested millions of dollars in collectibles.

While NFT collections include unique tokens that holders purchase with the main purpose of using as profile pictures on social media as a sign of status and belonging to a community (PFP NFTs), others focus on collectible items from specific themes – such as sports moments, game or media characters, etc. And this type of project gets the attention of collectors everywhere – not just for paying millions for an image but for collecting a unique digital asset.

NBA Top Shot NFTs
NBA Top Shot became the most traded digital collectible

It’s the case with NBA Top Shot – one of the largest NFT collections by sales to date that became very popular in the United States in 2021. NBA Top Shot attracted mainstream basketball fans and professional players alike, generating over $1 billion in sales volume and over 22 million sales since going live in late 2020. Just like trading cards of stickers from a sports season, digital collectibles got fans and clubs connected.

Game assets

Thanks to blockchain technology, the digital gaming landscape is experiencing a revolution with NFT games. Whereas gaming traditionally meant spending on in-game items, blockchain introduces a transformative “play-to-earn” model. Players can now own in-game assets as NFTs, selling or trading them as desired. These assets can even appreciate in value based on a player’s engagement.

Although many of these games are free, some ask for an initial investment (in some, you must mint NFTs to play), while others offer revenue-generating features at a cost. It’s worth noting that while NFT games show immense promise, they’re still in the early phases. The blockchain gaming market must overcome all kinds of challenges to attract mainstream users.

Hunter NFT skills Hunters On Chain Game
Polygon game Hunters on Chain includes NFTs as in-game characters

However, as the Web3 industry evolves, the NFT sector changes along with it. In 2022, we saw a huge increase in the blockchain gaming sector, which led to the rise of Polygon NFTs. These are often in-game assets that enhance gamers’ experiences using these popular dapps.

Top 10 Best Play-to-Earn Web3 Games: Monthly Updated Edition

Virtual land

Another NFT use case brings us to another popular area in tech right now: the metaverse. When it comes to virtual land, there is an increasing amount of options available. NFTs can be proof of ownership over a unique piece of virtual land in, for example, Decentraland, The Sandbox, HYTOPIA, and many other games and virtual spaces.

In 2017, Decentraland raised $26 million in just over an hour, promising a virtual world where players could own land and build on it. Years later, that world is growing rapidly. Art galleries opened up, NFTs are added to the game world, and at the same time, people make money creating and selling digital fashion. The Sandbox is seeing similar trends, with extremely high demand for virtual land, as well as other games and brands that are expanding their universes, like Axie Infinity and The Otherside by Yuga Labs.

Most Expensive Land NFTs

Businesses earn real money inside the virtual world by selling items. Users can visit a shop in Decentraland and buy virtual items, such as a CryptoKitty, a piece of art for their virtual home, or a new outfit or accessory for their in-game avatar. When talking about virtual land – each piece of land is an NFT representing a plot of land in the virtual world.

What makes each land NFT unique in this scenario is the location. The price of each NFT is also dependent on the market. Like real estate in the real world, the price differs by location. The higher the foot traffic around your plot of land or the proximity to another high-priced piece of land, the higher it can sell for. 

Most Expensive Land in the Metaverse

NFT artwork

The art world was ripe for disruption by blockchain and NFTs. Digital artists have long been searching for a way to leverage their hard work and, most importantly, get paid for that. Websites like Pixabay allow digital art to thrive, but artists don’t gain any significant financial gain. Virtual worlds like Decentraland have exploded with activity from digital artists wanting to display their work in virtual galleries, giving viewers and potential buyers a new, interactive way to discover and buy art.

Digital assets marketplaces specially created for digital artwork include Rarible, SuperRare, and Nifty Gateway. These platforms have emerged as places where artists can tokenize their artwork into NFTs, auction them, and allow users to bid or buy outright at a set price.

Fidenza is a famous digital art NFT collection by Tyler Hobbs on the Art Blocks hub
Fidenza is a famous digital art NFT collection by Tyler Hobbs on the Art Blocks hub

If these users also happen to own virtual houses or even a gallery, collectors can put these art projects up on their walls and have people experience their collections as well. One of the rising stars in this space is Beeple, who made a name on Instagram and now made millions through NFTs.

Another quite amazing benefit to the artists is that platforms like Rarible offer a lifetime value to the creator. I.e. the artist earns a percentage on every sale after the original first sale.

Top 10 Generative Artists in the NFT Frontier

Music NFTs

One industry ripe for change is the entertainment and music sector. For years, creatives and musicians have complained about unfair wealth distribution. NFTs have the ability to put power back into the hands of the creators, and big-name artists are already jumping on board.

Eminem, Don Diablo, The Wkend, Aphex Twin, Kings of Leon, and Snoop Dogg, to name a few, have already premiered their own NFT collections, and the list keeps growing. In all cases, the artists delivered more than the normal music album or video to their fans and instead delivered complete audio-visual experiences. In the next years, we might see NFTs reinventing the music industry with digital content as well.

All About Music NFTs: How It Works & Pioneering Artists

Memes NFTs

Another use case came when the creators of a viral YouTube sold the original as an NFT. Minecraft: The Last Minecart, created in 2011, is the first viral video created by Sam Gorski and Niko Pueringer, Founders of Corridor Digital. This 1-of-1 unique digital collectible was sold on NFT marketplace MakersPlace for 16.29 ETH. The short film is the first in a collection of viral video NFTs to be released by Corridor Digital and appeared to open the floodgates to more viral artwork sales.

Memes have always been a popular way to carry a message. Now, the owners of the original images are cashing in on their legacies. Zoë Roth, now 21, became an internet hit when she was pictured, aged four, standing in front of a burning building with a devilish smirk on her face. The woman in the viral meme has sold the original photograph for $473,000.

Memes can be turned into non-fungible tokens nfts
Memes can be turned into non-fungible tokens

Digital domain names

Blockchain domain names function like digital addresses for sending and receiving cryptocurrencies, akin to the role of email addresses. They can also be employed as unique usernames across blockchain applications, dapps, and metaverse environments. Stored on a transparent distributed public ledger, these domain names are secured by a smart contract, for example, dappradar.eth, and are represented as digital signature NFTs.

After securing a domain, users must keep it in their digital wallet. From there, settings can be adjusted via the domain name service, enabling the domain link to one or even multiple wallets across diverse blockchains. Those seeking to purchase these Web3 domains can explore platforms such as ENS Domains, Unstoppable Domains, and Sats Names.

Best Blockchain Domain Names including .eth, .crypto and .sats

Phygital tokens in toys and fashion

NFTs have earned acclaim for certifying authenticity and ownership of digital assets. But now, the limelight is turning to “phygital” NFTs – a blend of the physical and digital realms. Emerging as hot picks by brands, especially in fashion and toy industries, these NFTs serve as a beacon of originality.

They are a game-changer in battling counterfeiting problems, especially crucial for collectors in industries like toys. Phygital tokens enhance a consumer experience that harmoniously integrates physical assets with digital facets, appealing especially to the contemporary digital-centric audience.

Hot Wheels NFT Garage
Hot Wheels was one of the first toy brands to join the NFT bandwagon

Mattel’s Hot Wheels venture is exemplary. While kids have always cherished the toy car line, Mattel’s phygital NFT endeavor strategically tapped into the flourishing collectors’ market. Recognizing that vintage models could garner thousands at auctions, they presented a dual ownership model: own the digital token and its corresponding physical car, thereby interlinking the real and virtual domains.

Fashion isn’t far behind. Several global fashion moguls have plunged into the phygital NFT realm, with powerhouses like Adidas, Puma, Gucci, and Dolce & Gabbana leading the way. Dolce & Gabbana’s 2021 venture into the Web3 space stands out, releasing the Collezione Genesi NFT collection.

Dolce & Gabbana NFT collection
Dolce & Gabbana phygital NFTs and their real-world assets

This line swiftly became a sensation, drawing praise from British Vogue as a “million-dollar success story”. This initiative amassed over $6 million in sales, setting a record for the time. Interestingly, the designs were the handiwork of D&G founders Stefano Gabbana and Domenico Dolce.

10 Fashion Brands Going Digital with NFT Wearables for the Metaverse

How can someone make money from NFTs?

Making money from NFTs involves a combination of creativity, market research, investment acumen, and sometimes a touch of luck. Here are some ways people are profiting from the NFT space:

  • Creating and selling original artwork: If you’re an artist or content creator, you can mint your digital artwork, music, videos, or any form of creative content as an NFT and sell it.
  • Flipping NFTs: Similar to trading stocks or real estate, you can buy NFTs at a lower price and sell them at a profit. This requires a good understanding of the market and staying updated on trending collections and artists.
  • Staking: Some projects allow NFT holders to ‘stake’ their tokens or use them in yield farming setups to earn rewards, which can be another source of income.

However, it’s essential to approach the NFT market with caution. While there are numerous success stories, not everyone profits, and there are risks involved. Always conduct thorough research, be wary of trends that seem too good to be true, and consider seeking advice from professionals or those experienced in the NFT space.

Where can I buy an NFT?

Depending on the NFT project you want to invest in, you can buy non-fungible tokens on different platforms. Some Web3 projects have their own marketplace – like most games and metaverses, but you can also find NFTs for sale on specialized marketplaces. The most popular NFT marketplaces where anyone can buy NFTs or even list them for sale include:

However, the industry is changing constantly, and you will do right to check the DappRadar NFT Marketplace Ranking regularly to track the largest NFT marketplaces.

Moreover, if you want to check out NFT prices in different marketplaces simultaneously, you can use the so-called NFT marketplace aggregators, such as Blur. Get to know all about these NFT marketplaces and much more by reading the article below:

Top 25 Best NFT Marketplaces to Buy & Sell NFTs for 2023

How to create your own NFTs

Creating your own NFTs can be an exciting journey, allowing you to immortalize various digital assets on the blockchain. Whether it’s art, music, or even contractual agreements, the process is straightforward. Here’s a brief guide to get you started:

  1. Understand the nature and purpose of your project
  2. Decide on the type of digital asset you’ll make an NFT of
  3. Choose the right blockchain and consider fees and security
  4. Define the NFT minting process and marketplaces you’ll use to sell
  5. DYOR and choose a code or no code solution to create your NFTs

Once you have your collection, you can list it for free on DappRadar so it appears in the World’s Dapp Store’s Top NFT Rankings.

Remember that minting NFTs may involve costs, and hiring unknown freelancers to create an NFT collection for you can be dangerous. Rarible, OpenSea, and Binance offer easy-to-use and safe tools that will rid you of technicalities so that you can have your own NFTs ready to sell – at a cost, of course. Moreover, there is no guarantee whatsoever that your NFTs will sell for millions of dollars.

Always make sure you have a purpose for immortalizing something on the blockchain. The NFT hype is long gone; now, digital collectors value utility more than ever.

What celebrities own NFTs?

As you already know, non-fungible tokens are very popular amongst the rich and famous. Paris Hilton, Snoop Dogg, Justin Bieber, Serena Williams, and Eminem are some of the biggest names to have purchased digital collectibles and openly invested in their own NFTs.

Paris Hilton and Jimmy Fallon are celebrities who own Bored Ape NFTs
Paris Hilton and Jimmy Fallon are celebrities who own Bored Ape NFTs

Celebrity Crypto & NFT Wallets Rich List

Security tips to avoid NFT scams

The burgeoning NFT market, while ripe with opportunity, is also teeming with risks. As enthusiasts and collectors venture into this exciting domain, scam artists likewise try to capitalize on unsuspecting victims. Protecting oneself from fraudulent activities requires being proactive and educated about potential threats.

  • Research before purchase: Before buying an NFT, thoroughly investigate its origins and smart contracts. Ensure the creator is reputable and the listing isn’t a duplicate or fake.
  • Secure your wallet: Be careful where you connect your “NFT-trading” wallet, and consider having a secondary hardware wallet for added protection as your safe.
  • Beware of phishing attempts: Avoid unsolicited messages or emails prompting you to click links or provide personal information.
  • Stay updated: Regularly update your wallet and associated apps to ensure you have the latest security features.
  • Public forums and social media valuation: Engage carefully in NFT forums and communities. Scammers may promote false information or deceitful deals.

Six Ways to Spot an NFT Scam

What does the future of NFTs look like?

The NFT landscape has undergone a remarkable evolution since its 2021 bull run. While that period was characterized by enormous hype, with seemingly any project raking in millions, those days of instant riches for value-less endeavors are seemingly behind us. However, this shouldn’t be perceived as the end; rather, it’s the maturation of an industry that is becoming increasingly sophisticated.

  • Utility is key: No longer will an NFT just be a digital collectible. Their use cases will expand, from representing in-game assets, access tokens, to real-world entitlements and more.
  • Dynamic NFTs and storytelling: The NFTs of the future will be far from static; they will evolve, change, and adapt, interweaving the power of narratives. This blend of dynamism and storytelling will transform ownership into a deeply engaging and interactive experience rather than just mere possession.
  • Phygital evolution: As we’ve seen, the convergence of the physical and digital realms is intensifying. NFTs will further bridge this gap, offering users tangible benefits in both worlds.
  • Gaming and metaverses: With giants like Ubisoft stepping into the fray, NFTs in games and expansive metaverses will become commonplace, enhancing user immersion and ownership.
  • Cross-chain interoperability: As blockchains evolve, the future will see NFTs seamlessly traversing across different chains, enhancing their liquidity, accessibility, and utility.

While we might currently be experiencing a crypto winter, significant brands like Disney, Ubisoft, and PayPal are making forays into the blockchain realm, indicating that the world of NFTs is just beginning its ascent. This maturity of the space points to a future where NFTs are not just about art or collectibles but are deeply entrenched in our daily digital experiences, bridging gaps and opening up new avenues.

Explore the NFT market on your own

NFTs are ushering in a new era of genuine digital ownership, especially as our lives become increasingly online. Imagine living fully in digital realms and needing real assets in those spaces; that’s where NFTs shine. Now that you’re familiar with the concept of Non-Fungible Tokens, you might be wondering about the top projects in this dynamic space. For a closer look at the cream of the crop, check out the Top NFT Collections Ranking on DappRadar.

Discover Trending NFTs

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