NFTs explained: A Must-Read Guide

Based on blockchain technology, NFTs offer unprecedented traceability and authenticity, opening up new possibilities in numerous industries.

But what exactly are NFTs? Simply put, they are non-fungible tokens that represent ownership of a specific digital asset.

This means that each NFT is one-of-a-kind, certified, and securely owned through registration on the blockchain. This innovative technology bestows value and authenticity upon virtual objects, ushering in a wholly new digital economy.

The emergence of NFTs has had a profound impact on the proliferation of online artwork, enabling artists to sell and monetize their creations more directly and transparently. However, NFTs extend beyond the realm of art—they can represent various types of digital assets, including videos, music, and much more.

In this article, we will guide you through the fundamental concepts and different categories of NFTs, delving into their intricacies and distinctive features.

Are you ready to explore how NFTs are revolutionizing the notion of ownership, forging a new digital paradigm? Buckle up and get ready to embark on an ever-evolving world of possibilities!

  • What are NFTs?
  • What does non-fungible mean?
  • History and Origins of NFTs
  • How do NFTs work?
  • The most renowned types of NFTs

What are NFTs?

NFTs, short for Non-Fungible Tokens, are unique digital identifiers recorded on a blockchain and used to certify ownership and authenticity.

By leveraging blockchain, NFTs provide an immutable record of ownership, guaranteeing the scarcity and exclusivity of each token. This inherent uniqueness sets NFTs apart from traditional cryptocurrencies like Bitcoin or Ethereum, which are fungible and can be exchanged on a one-to-one basis.

The transparent and decentralized nature of the blockchain ensures that every NFT is indivisible, traceable, and resistant to duplication or tampering. This enables creators, artists, and collectors to establish trust and provenance in the digital realm, eliminating the need for intermediaries and reducing the risk of fraud.

Furthermore, the blockchain’s distributed ledger allows for seamless and secure transferability of NFTs across various platforms and marketplaces. This enables a global audience to participate in the buying, selling, and trading of these unique digital assets, fostering a vibrant and dynamic ecosystem.

What does non-fungible mean?

Fungible tokens are defined as divisible and identical tokens. For example, we can think of 1€ coins. All coins of the same denomination, regardless of the year or place of minting, have the same value: a 1€ coin is worth exactly the same as another 1€ coin. Coins are considered fungible because they are completely interchangeable.

Cryptocurrencies, such as Bitcoin, are by their nature fungible tokens, meaning they can be duplicated infinitely in exactly identical and interchangeable copies. On the other hand, NFTs are non-fungible: each token is uniquely identifiable and therefore unique.

Another characteristic of fungible tokens is their divisibility into smaller units. For example, a bitcoin can be divided into one hundred million units called Satoshis (Sats).

Each and every individual NFT, however, is completely unique and is not divisible. An NFT cannot be divided into subunits, although it is possible to split the ownership of an NFT among multiple people through the use of a smart contract. 

It’s important to keep in mind that this practice doesn’t actually divide the token into multiple parts but only enables the possibility of “dividing” the ownership of the token, similar to how it can be done with a house or a car in the real world.

History and Origin of NFTs

As early as 2011, just two years after the birth of Bitcoin, some programmers had fun embedding hidden short messages in metadata. It was a sort of very first experiment of what NFTs would later become.

About a year later, someone created “colored Bitcoins.” But be careful, there was no actual color involved. “Colored” was simply a term used to indicate the customization of the metadata of these Bitcoins.

However, Colored Coins didn’t go very far for obvious reasons. It was not yet possible to program such tokens because the Bitcoin blockchain didn’t have that functionality. We would have to wait for the birth of the Ethereum blockchain.

In 2013, thanks to the brilliant developer Vitalik Buterin, Ethereum was created, a completely alternative blockchain to Bitcoin.

The great advantage of Ethereum came from the ability to program on this infrastructure using codes that automatically execute transactions between parties when certain conditions are met. We’re talking about smart contracts, which made it possible to create and program non-fungible tokens.

In 2014, a fork from the Bitcoin blockchain gave rise to a blockchain called Counterparty, which allowed the creation of unique crypto assets. Rudimentary forms of NFTs began to circulate, mostly consisting of simple memes. In the same year, artist Kevin McCoy created a digital artwork, a very short video titled “Quantum,” marking the first form of crypto art in history.

2017 was the year when the NFT market truly took shape, with the launch of the famous Crypto Punks and Crypto Kitties collections.

The rest is history. On March 12, 2021, Christie’s auction house sold the artwork titled “Everydays: the first 5000 days” by Beeple, also known as Michael Joseph Winkelmann, for a staggering $69.3 million.

In 2021, according to reports from Nonfungible, the NFT market reached $17.6 billion, with a 21,000% increase compared to 2020.

How do NFTs work?

Smart contracts play a fundamental role in the creation of NFTs as they contain various information and functions, including metadata, that define the rules for token transfer and other desired functionalities. In addition to basic information such as the token ID and owner, additional elements can be included, such as royalties to be paid to the NFT creators and sale conditions.

On Ethereum, and also on other blockchains, there are standards and rules that smart contracts must follow to ensure essential functionalities like token creation and processing of transfer transactions. Two of the main standards used for NFT creation are ERC-721 and ERC-1155.

The ERC-721 standard allows for the creation of unique NFTs or collections of NFTs composed of unique assets with unique owners. In practice, each token has a unique identifier and can be owned by only one person at a time.

On the other hand, the ERC-1155 standard enables the creation of non-unique digital assets, allowing for multiple copies of the same NFT, each of which can have multiple owners. This way, a single token can represent an unlimited quantity of copies, each with its own ownership.

However, it’s important to note that NFTs exist on numerous blockchains, not just Ethereum! All major blockchains that support smart contracts can host the minting of NFTs, which is the process of creating a non-fungible token on the blockchain. These blockchains include Polygon, Avalanche, Polkadot, and many others.

The most renowned types of NFTs

As we’ve seen with the standards, NFTs can differ in their technical characteristics, which in turn determine their properties and make them suitable for various purposes. However, there are some types of NFTs that you may have already heard of or will definitely hear about, and it’s worth knowing more about them.

Dynamic NFTs

Dynamic NFTs are a particular type of token that can change over time based on programmable features set by developers. These tokens can interact with external data and conditions that alter their configuration.

For example, a dynamic NFT could change the color of a hat worn by a character based on the average daily temperature in Madrid or vary the expression of a football player in an NFT trading card based on the results of their latest match. This is achieved through the use of metadata embedded in the smart contracts of dynamic NFTs, which adapt to information obtained from external sources such as weather forecasts or sports results.

A famous example of a dynamic NFT is “Crossroad” by Beeple. In this artwork, the final appearance of the NFT depended on the outcome of the 2020 U.S. presidential elections. Dynamic NFTs offer the opportunity to create collections that evolve over time, making the user experience more interactive and engaging.


PFP, which stands for “Profile Picture,” refers to NFTs used as profile images on social networks. They can be individual NFTs or entire collections designed to be used as profile pictures. Usually, these collections are based on a common character or theme reproduced in all the artworks. Some famous examples of PFPs include the “Bored Ape Yacht Club,” “Doodles,” “World of Women,” and “Meebits.”

The popularity of NFTs as profile pictures has led Twitter to introduce the ability to certify NFTs used on its platform, providing additional authentication and recognition for users who use them as profile images.


POAP, which stands for “Proof of Attendance Protocol,” is a unique type of NFT that is distributed at events to certify people’s participation.

Organizers of courses, conferences, concerts, and fairs can create POAPs to distribute to participants. POAPs are considered the “bookmarks of your life” because they build a map of experiences and achievements within your digital wallet. POAPs appear as medals and badges, and their main utility is to ensure people’s involvement in specific projects or activities.

Blue chip

Blue chip NFTs are collections that have proven over time to maintain a stable value and are indicative of the solidity of the project to which they belong. The term “blue chip” is borrowed from the world of traditional investments, where it is used to indicate stocks of stable and well-established companies with a reputation for reliability and market success.

In the context of NFTs, blue chip NFTs represent collections that have gained considerable popularity and strong community support over time. Usually, these collections include high-value and rare NFTs. Examples of blue chip collections are CryptoPunks and the Bored Ape Yacht Club.

Within these collections, some NFTs are considered more “blue chip” than others due to their rarer or unique attributes. For example, within CryptoPunks, NFTs with particularly rare or desirable attributes may have a higher value than others. These NFTs are considered stable and secure as investments in the NFT market, even during bear market periods when prices of other NFTs may be more volatile.


There’s no doubt that NFTs have the potential to revolutionize how we interact with the digital world.

These tokens offer an unprecedented level of traceability and authenticity with potentially infinite applications, all waiting to be explored and developed. Brands, development agencies, and innovators are constantly searching for new use cases and improving the underlying technologies.

Now is the perfect moment to explore and uncover the vast opportunities that NFTs have to offer. Stay ahead by following the trends, engaging in discussions, and staying informed about the latest developments. The NFT revolution is already in motion, and you have the chance to be an active participant and shape its course.

Previous ArticleNext Article