So what is the magic around this technological miracle, how does it work, and why is it needed at all? First, let's look at it from a well-known perspective.
As it was already said in millions of articles on this topic, NFT is a non-fungible, in other words unique, token. It cannot be replaced, copied, or split. Roughly speaking, in the blockchain system it’s a unique element that contains certain information and cannot be rewritten or corrected in any way. Perhaps, in terms of uniqueness, NFT can be compared to snowflakes or fingerprints. Anything can be turned into NFT: paintings, songs, documents, real estate or films. As, for example, recently happened with the film "Zero Contact" with Anthony Hopkins, or Mila Kunis's animated series Stoner Cats.
There are many examples, but this will not make it clearer what is essentially a “non-fungible token” and why they are needed at all. Let's discuss several sides of the issue. Technically speaking, in the Ethereum blockchain, NFT is primarily a certificate of ownership of a unique piece of digital data that can be tracked on the blockchain. And although non-fungible tokens are created from digital data, they can represent both digital (video, music, pictures) and tangible (legal contracts, signatures, real estate or car documents) assets.
When an NFT is created or minted, a certain code is executed. It is recorded in smart contracts that conform to a number of standards like ERC-721. The information is then added to the blockchain in which the NFT is managed.
Most NFTs are built using the ERC-721 standard. However, there are other standards, like ERC-1155, which allows the creation of semi-fungible tokens, or EIP-2309, which allows you to mint as many NFTs as you like in a single transaction. There are several stages in the creation of non-fungible tokens, such as creating a new block, confirming information, and then writing information into the blockchain.
Each minted non-fungible token has a unique identifier that is directly associated with one Ethereum address. In addition, from the very moment of creation, each token has an owner, and this information is easy to verify. All the information about the token, owner, terms of sale, resale, the number of transactions is stored in the blockchain. In other words, you can track everything that happened to the token from the moment of creation to every second of its existence. It is like seeing from the inside a detailed chronicle of the life of a digital element. In other words, if you own an NFT, you can easily prove that you own it.
The verification and confirmation of information in the process of creating an NFT is carried out by miners. They are the ones who confirm the new NFT as an asset in the blockchain.
To activate a non-fungible token, the owner's account balance must be updated, which will give the opportunity to sell or own NFT in the future. Transactions that confirm this information need to be added to the block, and then to the blockchain. The entire process must be confirmed by everyone on the network as “correct”, which confirms your ownership of the non-fungible token and allows you to verify not only this right, but also the existence of the token as a whole.
Miners also ensure the security of your token, and for that, mining must be hard and fair enough so that no one can copy/paste your NFT or steal it.How NFTs work Non-fungible tokens can be stored or sold on any NFT market or a peer-to-peer network. You are not tied to any platform, and you do not need intermediaries. NFT creators can set a limit on the number of tokens created, which affects their future value, and program them in a way that allows receiving a certain percentage (royalty) for each resale.
This tool is especially beneficial for artists, writers and other creators of non-fungible tokens, as they can make money this way without worrying about copyright. Since the uniqueness of the NFT technology was originally incorporated, such tokens are especially popular among collectors and investors. Before the advent of non-fungible tokens, people collected stamps, trains, coins, and more.
For example, the 1794 silver dollar in 2013 was auctioned for $10 million. This value is explained by the uniqueness of the coin.
NFTs work the same way. Their cost depends on many factors, and it can grow over time. Therefore, they are popular among people who consider them investments. After buying, for example, one of the NFT CryptoPunk, you can later sell it with great profit.