Skip to content

NFTs Explained

Describing blockchains, FT and NFTs, smart contracts and more.

NFT (Non-Fungible Token)

To understand a non-fungible token, you first have to understand a fungible token (FT). Examples of fungible tokens include bitcoin, ethereum, dogecoin or decentraland.

To make a token fungible, every token has to be the same as each other. This is the case with all the tokens listed above, as 1 ETH coin is equivalent as the other.

A non-fungible token is where tokens are not equivalent to each other, and thus their values are not equal. Because of this, one-of-a-kind properties can be attached, such as an artwork unique to your singular token. You have probably seen this evident online with the many articles that hit the headlines – just like this Beeple NFT.

Beeple sold an NFT for $69 million - The Verge

Blockchain

You’ve probably heard it mentioned, but might not know exactly what it means. Breaking it down into two sections, to make a blockchain, you first have blocks and chains.

Blocks

Say you just transferred Ethereum to a friend. Once you’ve clicked “Send” on the payment, it then waits in a queue until it is chosen to be processed.

The time you are waiting for processing depends on how much incentive you’ve given to the miner to pick your transaction over others.

The chosen transaction orders are bundled into a block. Blocks are then verified, and those transactions finalised – then your friend will get your Ethereum.

Chains

The blocks that were explained above then have to be recognised by everyone that is validating the transaction system. This is where chains come in. They make sure that transaction blocks are in a certain order, and this order then can form a chronological “electronic ledger” of all transactions, for everyone to see.

Block time is used to refer to how long it takes a block to be created and transactions completed.

Blockchains can be seen in action, by looking at explorers, such as etherscan.io

An example of an explorer showcasing miners, block number, time and reward.

Crypto Exchange

A crypto exchange, or swap, is a place where buyers and sellers trade their crypto on a platform. These exchanges can take many different forms, but usually involve connecting your wallet to a swap website, and swapping one crypto coin for another.

Exchanges for fiat (non-crypto) currencies involve you sending fiat to a certain bank account, and in exchange you get crypto coins into your wallet. Vice versa if selling to the exchange.

Uniswap is an example of a crypto-crypto exchange

Crypto.com is an example of a fiat-crypto-fiat exchange

Crypto Wallets

“Wallets are like digital bank accounts” – Once you have a grasp of non-fungible and fungible tokens, you have to store them somewhere. This is where a wallet comes in. Different wallets are compatible with storing different tokens, based on the network these tokens are developed on.

Solflare is an example of a Solana-based wallet

Metamask is the most popular Ethereum-based wallet

This video describes how you can create a Metamask wallet, does not require any technical knowledge.

How to Create a Metamask Wallet

Smart Contracts

Like a normal contract, but in the digital world. The rules are coded into the contract, and then these rules are executed when a certain threshold is reached, in whatever determined metric.

These contracts are supported on multiple blockchains, including Ethereum, Solana, and more. They are what enable the creation of NFTs, because the code can determine the token to have not be divisible, be unique, and have certain characteristics, and more.

Notable improvements to blockchain include the ERC-721 and ERC-1155 updates, which enable smart contracts on the Ethereum blockchain.