NFTs: what they are and what’s left after the hype
Lesson 18 of 58 in the course “Crypto”. Free, with animations and a quiz.
What an NFT is
An NFT (non-fungible token) is a one-of-a-kind token. Any bitcoin equals any other, but NFT #4721 from a collection is the only one. The blockchain records the token number, the owner and a link. The image itself usually lives behind that link: on the IPFS network or simply on someone’s server. If the server goes down, the image can vanish while the token stays. Buying an NFT, you buy a record of ownership, not the file.
The hype and the hangover
In March 2021 a work by the artist Beeple sold at Christie’s for $69.3 million, and the boom began: ape avatars, celebrity collections, all of it at once. Bored Ape prices reached hundreds of thousands of dollars apiece in 2022, then fell many times over. In September 2023 dappGambl counted that of about 73,000 collections, 95% had a market cap of zero. The lesson: an NFT’s price rests on demand, and demand can disappear.
Where NFTs are actually useful
Forget the pictures and an NFT is a handy way to prove “this is mine”. An ENS domain such as vitalik.eth is an NFT: people can send you money to it instead of a long address. An event ticket as an NFT cannot be faked, and resales are visible. Game items can be sold outside the game. And in DeFi, your liquidity position on Uniswap v3 is issued as an NFT too. We will meet it in the DeFi level.
If you buy anyway
People buy on marketplaces such as OpenSea and Magic Eden. The main trap is not the price but the signature. A “free mint” from a chat link often asks for setApprovalForAll: permission to move every NFT of that collection in your wallet. Sign it, and an attacker can take them. Go only through the project’s official site, check the contract address and the verification checkmark. Keep a separate wallet with a small amount for experiments. And note: creator royalties on resale are now optional on many marketplaces.
Check yourself
- What exactly is recorded on the blockchain when you buy an NFT picture?
Correct answer: The token number, the owner and a link to the image. Usually the image sits behind a link. Copyright does not pass to the buyer by default. - A “free mint” asks you to sign setApprovalForAll. Why is that dangerous?
Correct answer: The site gets the right to take every NFT of that collection. It is a permission for everything at once. Signatures like this are the main way NFTs get stolen. - Where does an NFT bring value with no hype at all?
Correct answer: An ENS domain instead of a long address. NFTs shine where proving ownership matters: domains, tickets, game items, DeFi positions.
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