Non-fungible tokens, or NFTs, are blockchain tokens with distinct identifiers and ownership records. They can point to digital media, game items, tickets, credentials or rights defined by a project. Buying an NFT normally transfers the token, not automatically the copyright, physical asset or every commercial right associated with its metadata.
What makes non-fungible tokens different?
Fungible units are interchangeable within the same asset: one properly denominated unit is equivalent to another. A non-fungible token has a distinct token ID within a contract, so ownership and transfers can be tracked separately. Uniqueness of the identifier does not guarantee that the linked artwork, claim or economic value is unique.
The ERC-721 specification defines a standard interface for non-fungible tokens on Ethereum. It includes ownership, transfer and approval functions and optional metadata. ERC-1155 can manage multiple fungible and non-fungible token types in one contract and supports batch transfers.
Non-fungible tokens: ERC-721 and ERC-1155
- ERC-721: each token ID maps to one owner and can have its own metadata URI.
- ERC-1155: one contract can manage many token IDs, each with a quantity, supporting unique or editioned assets.
- Approvals: owners can authorise another address or marketplace contract to transfer tokens.
- Events: transfer and approval events help wallets and indexers reconstruct ownership.
The official ERC-1155 standard explains its multi-token and batch-transfer design. A standard improves interoperability; it does not audit the project, guarantee metadata persistence or establish legal ownership beyond the contract.
How non-fungible token metadata works
The blockchain usually stores the token contract, token ID and ownership state. Images, video and descriptive metadata may be stored separately through HTTPS servers, IPFS or other systems. The contract’s token URI points wallets and marketplaces toward that information.
If metadata is mutable, controlled by one server or improperly pinned, it can change or disappear. Even decentralised storage needs durable hosting and correct content identifiers. Buyers should inspect the contract and metadata architecture instead of assuming the media itself is fully on-chain.
NFT ownership versus copyright
Blockchain ownership shows which address controls the token under the contract. Copyright and commercial-use rights are separate legal questions. Unless a licence or contract grants additional rights, purchasing an NFT may provide only the ability to hold and transfer the token plus a limited right to display associated media.
Creators must also own or license the content they mint. A blockchain does not verify authorship, and an unauthorised minter cannot create valid copyright by issuing a token. Terms, licences and jurisdiction matter.
Uses for non-fungible tokens
- Digital collectibles: tokenised editions, art and community memberships.
- Games: portable or tradeable items, subject to the game operator’s rules.
- Tickets and access: verifiable entry credentials and loyalty benefits.
- Identity and credentials: attestations where public transferability may need restriction.
- Physical-asset claims: tokens linked to custody, redemption and legal agreements.
- Financial positions: unique liquidity, lending or staking positions represented on-chain.
These uses depend on more than token standards. Readers can compare fungible assets in our ERC20 token guide and explore the wider NFT archive.
Non-fungible token marketplace approvals and scams
To list or trade NFTs, users often approve a marketplace contract as an operator. A malicious signature, fake marketplace or compromised operator can expose multiple tokens. Users should verify domains, contracts, networks and approval scopes, then revoke permissions that are no longer required.
- Impersonation and copied collections.
- Phishing links and deceptive wallet signatures.
- Wash trading and manipulated floor prices.
- Rug pulls, abandoned roadmaps and hidden admin powers.
- Counterfeit metadata or unauthorised copyrighted work.
- Bridge, smart-contract and marketplace vulnerabilities.
Major NFT risks
- Market risk: demand and liquidity can collapse quickly.
- Valuation risk: sparse trades make prices easy to distort.
- Metadata risk: linked files or attributes may change or vanish.
- Legal risk: ownership, copyright, securities and consumer rules vary.
- Custody risk: stolen keys or malicious approvals can transfer tokens irreversibly.
- Technology risk: contract, marketplace or bridge failures can cause loss.
- Utility risk: access or game benefits may depend on a continuing operator.
A buyer checklist
- Verify the network, contract address and token ID.
- Inspect the creator, provenance and minting authority.
- Read the licence and commercial-use terms.
- Check where metadata and media are stored.
- Review upgrade, pause, royalty and operator powers.
- Assess trading concentration and genuine liquidity.
- Understand marketplace approvals before signing.
- Do not treat rarity or celebrity promotion as evidence of value.
The bottom line
Non-fungible tokens are useful ownership and transfer primitives, but the token is only one layer. The associated media, licence, issuer, storage, marketplace and legal rights determine what the buyer actually receives. Verify each layer before assigning value to an NFT.