NFT (Non-Fungible Token)

What makes NFTs distinct

Each NFT has a unique token ID within its contract. While ERC-20 tracks balances ("you have 100 of this token"), NFT standards (ERC-721 and ERC-1155) track specific ownership ("you own #1234").

This distinction matters because:

• Each NFT can have its own properties — different artwork, traits, metadata.
• Suitable for things that aren't interchangeable: art, collectibles, identity.
• Ownership can be transferred specifically; not aggregated like fungible tokens.

Major NFT categories

Several use cases that have stuck:

• PFP collections — CryptoPunks, Bored Ape Yacht Club, Pudgy Penguins, Azuki. Identity-as-art.
• Generative art — Art Blocks, fxhash. Algorithmically created art.
• 1-of-1 art — single-edition pieces from individual artists.
• Membership / access — DAOs, communities, events.
• Domain names — ENS, Unstoppable Domains.
• Game items — character NFTs, item NFTs in crypto-native games.
• Music and media — limited adoption but emerging.

NFT timeline

A condensed history:

• 2014 — earliest experiments (Counterparty on Bitcoin).
• 2017 — CryptoPunks launched (June); ERC-721 standard proposed.
• 2017-2018 — CryptoKitties popularized NFTs; Ethereum congestion ensued.
• 2020 — NBA Top Shot brought broader audience.
• 2021 — explosive growth. Beeple's $69M sale at Christie's; Bored Apes; Art Blocks.
• 2022 — peak volume early in year; subsequent steep decline.
• 2022-2023 — broad bear market; royalty enforcement debates.
• 2024-2025 — niche persistence; reduced mainstream attention.

The 2021-2022 boom

A specific peak:

• OpenSea volumes exceeded $5B/month at peak.
• Bored Apes floor reached 150 ETH ($420K).
• Major brand integration — Nike, Adidas, Gucci, others launched NFT projects.
• CryptoPunks sold for tens of millions of dollars individually.
• Art Blocks generative pieces reached six-figure floors.

Most of this has retraced significantly. Top PFP floors are down 80-95% from peaks; trading volumes are a fraction of 2022 highs.

Royalty controversy

A defining 2023 event:

• Originally — major marketplaces (OpenSea) routed creator royalties (typically 5-10% of secondary sales) automatically.
• 2023 — Blur and other marketplaces stopped enforcing royalties.
• Race to the bottom — competitive pressure pushed even OpenSea to reduce royalty enforcement.
• Creator income collapsed — what had been substantial recurring royalty income disappeared.

The episode revealed structural fragility: royalties were never on-chain enforced, only marketplace-enforced. Once marketplaces competed on price (no royalties), the system collapsed.

What's worked vs. struggled

Use cases that have shown durability:

• Generative and 1-of-1 art — built genuine art-market presence.
• Membership and access tokens — where the NFT confers ongoing value.
• Domain names (ENS) — practical utility.
• Specific gaming integrations that genuinely improve player experience.

Use cases that have struggled:

• PFP collections generally — most lost 80-95% of peak values.
• Music NFTs — never reached scale.
• Brand experiments — most quietly wound down.
• Real-world asset NFTs — mostly moved to other formats.

Storage and permanence

NFT durability depends on metadata storage:

• On-chain — most permanent. Examples: CryptoPunks, Art Blocks, Nouns.
• IPFS — durable if pinned. Most modern collections.
• Arweave — pay-once-store-forever. Increasingly preferred for permanence.
• Centralized HTTP — least durable; depends on team continuing hosting.

For long-term collectors, choosing collections with strong storage matters more than is sometimes appreciated.

Buying and selling NFTs

Major marketplaces:

• OpenSea — historically dominant; still major.
• Blur — surged with aggressive royalty stance and trading rewards.
• Magic Eden — large on Solana and multi-chain.
• Tensor — Solana-focused.
• Foundation, SuperRare — art-focused.

Different marketplaces have different fee structures, royalty enforcement, and audience characteristics.

Risks specific to NFTs

A few:

• Liquidity risk. Most NFTs have limited buyers; selling specific pieces takes time.
• Storage risk. Centrally-hosted metadata can disappear.
• Royalty erosion. Creator income from secondary sales has become unreliable.
• Floor manipulation through wash trading.
• Project rug pulls — team abandons collection, drains funds.
• Counterfeit collections — fake NFTs imitating popular collections.

What individuals should know

For collectors:

• Treat NFTs as art/collectibles, not investments.
• Buy what you genuinely value rather than pure speculation.
• Verify authenticity — many fake collections exist.
• Check storage configuration before treating as permanent.
• Don't over-allocate capital to NFTs.

For creators:

• Royalty income isn't guaranteed. Plan accordingly.
• Quality of work matters more than NFT-specific dynamics for long-term success.
• Storage choice affects your work's durability.
• Engage with collectors as community, not just transaction counterparties.

NFTs delivered some genuine innovation (verifiable digital scarcity, programmable royalties, collector-creator relationships) and generated enormous speculative excess. The category remains real but smaller than 2021-2022 hype suggested. Specific niches (digital art, identity tokens, certain games) have produced lasting value; the broader category has consolidated to a fraction of peak activity.