Glossary

NFTs: The Complete Guide to Non-Fungible Tokens

noun•Spawned Glossary

NFTs (Non-Fungible Tokens) are unique digital assets verified on a blockchain. Unlike cryptocurrencies, each NFT is distinct and cannot be exchanged on a one-to-one basis. They serve as certificates of ownership for digital items, from art and music to virtual real estate and token-gated access.

Key Points

1An NFT is a unique, non-interchangeable digital token representing ownership of a specific asset.
2Most NFTs exist on Ethereum or Solana blockchains, with Solana offering lower fees (often under $0.01 per transaction).
3Primary uses include digital art, collectibles, gaming items, membership passes, and real-world asset tokenization.
4Creating an NFT ('minting') can cost from $1 to over $100, depending on the blockchain and network congestion.
5Ownership is recorded on-chain, but the linked digital file (like a JPEG) often resides on a separate server or decentralized storage.

What Exactly Is an NFT?

Beyond the hype of million-dollar JPEGs lies a fundamental technology for proving digital ownership.

An NFT, or Non-Fungible Token, is a unique digital certificate stored on a blockchain. The term 'non-fungible' means it is not interchangeable with another identical item. For example, one Bitcoin is fungible—it can be swapped for another Bitcoin. An NFT is not. It is a one-of-a-kind digital deed.

Think of it like a serial number on a rare trading card or the title to a house. The blockchain records who owns that specific serial number or title. The NFT itself typically contains a link (a URI) pointing to the digital asset it represents, such as an image, video, or audio file. This link is part of the token's immutable metadata.

How NFTs Work: A Step-by-Step Breakdown

The lifecycle of an NFT involves creation, ownership transfer, and verification—all managed by smart contracts on a blockchain.

The Technical Process

Creation (Minting): An artist or creator uses a platform or writes a smart contract to 'mint' the NFT. This process generates a new, unique token on the blockchain (e.g., Solana or Ethereum). The token's metadata includes details like the creator's wallet address, a link to the asset, and properties.
Storage: The high-resolution image or file is usually too large to store directly on-chain. It is hosted on decentralized storage systems like IPFS or Arweave, or sometimes on traditional servers. The NFT token contains a persistent link to this file.
Ownership & Transfer: Ownership is assigned to a crypto wallet address. The NFT can be sold or transferred to another address. Each transaction is recorded on the blockchain, creating a public, verifiable history (provenance).
Verification: Anyone can use a blockchain explorer to verify the NFT's contract address, owner, and transaction history, confirming its authenticity.

Major NFT Use Cases Beyond Digital Art

NFTs are more than collectible profile pictures.

While digital art brought NFTs to mainstream attention, their utility spans multiple industries.

Digital Art & Collectibles: The most famous use case. Artists tokenize their work, enabling direct sales and automatic royalty payments on secondary sales (typically 5-10%).
Gaming & Virtual Worlds: NFTs represent in-game assets like skins, weapons, or virtual land. Players truly own these items and can trade them outside the game's ecosystem.
Membership & Access: NFTs act as keys for exclusive communities, event tickets, or subscription services. Holding a specific NFT in your wallet can grant access to a Discord server or a real-world event.
Real-World Assets (RWA): Physical assets like real estate, luxury goods, or certificates of authenticity can be 'tokenized' as NFTs to simplify ownership transfer and prove authenticity.
Identity & Credentials: Academic degrees, professional licenses, or medical records could be issued as NFTs, giving individuals control over their verifiable data.

NFTs on Solana vs. Ethereum: A Direct Comparison

Where you mint your NFT drastically affects cost and accessibility.

Choosing a blockchain for NFTs involves trade-offs between cost, speed, and ecosystem size.

Feature	Solana NFTs	Ethereum NFTs
Minting Cost	~$0.01 - $0.10	$10 - $150+ (varies with gas fees)
Transaction Speed	~400ms block time	~12 seconds block time
Transaction Cost	Typically < $0.01	$1 - $50+ (network dependent)
Primary Standard	Metaplex (Token Metadata)	ERC-721, ERC-1155
Market Dominance	Growing, especially for high-volume trading	Historically dominant, larger total value
Ecosystem	Fast-growing with platforms like Magic Eden, Tensor	Established with OpenSea, Blur, LooksRare

The Bottom Line: Solana offers a low-friction experience ideal for high-volume, affordable collections and new creators. Ethereum is the established leader for high-value, 'blue-chip' art and collections, but at a significantly higher operational cost.

How to Create an NFT on Solana

You can launch a Solana NFT in under 10 minutes for less than the price of a coffee.

Minting an NFT on Solana is cost-effective and fast. Here's a simplified process using common tools.

Set Up a Wallet: Download a Solana wallet like Phantom or Solflare. Fund it with a small amount of SOL for transaction fees (0.01 SOL is plenty to start).
Prepare Your Asset: Create your digital artwork, music, or file. Recommended format: PNG, JPG, MP4, or GIF. Size should be optimized for web viewing.
Choose a Platform: Use a no-code minting platform. Options include:
- Metaplex's Candy Machine: For launching a large collection (thousands of NFTs) programmatically.
- Simple Minting Tools: Platforms like Solana's Tools or Magic Eden's Creator Hub offer user-friendly minting for single pieces or small batches.
Upload & Mint: Connect your wallet, upload your file and set metadata (name, description, properties). You'll pay a minting fee (often 0.01-0.05 SOL) to create the NFT on-chain.
List for Sale (Optional): Immediately list your new NFT on a marketplace like Magic Eden, Tensor, or Solanart to make it available for purchase.

Verdict: Are NFTs Worth the Investment?

NFTs are a tool, not a guarantee. Success depends on how you use them.

NFTs are a high-risk, high-potential asset class and a transformative tool for creators.

For Collectors & Investors: Treat NFTs like speculative assets. The market is volatile. Most NFTs may lose value, while a few may appreciate significantly. Only invest what you can afford to lose, focus on projects with strong communities and utility, and prioritize NFTs on chains with lower fees (like Solana) for more accessible entry points.

For Creators & Builders: NFTs are a foundational technology. They enable new business models through on-chain royalties, direct community engagement, and token-gated experiences. For launching a tokenized community or project, using a platform like Spawned that combines token creation with an AI website builder streamlines the process. Instead of paying $29-99/month for a website and separate launch costs, you get both for a 0.1 SOL launch fee, with a sustainable 0.30% fee structure supporting ongoing holder rewards.

Final Recommendation: Approach NFTs as a participant in a new digital economy, not just a get-rich-quick scheme. Their long-term value lies in utility, community, and the new forms of interaction they enable.

The Future of NFTs: More Utility, Less Speculation

The JPEG era is just chapter one.

The next phase of NFTs moves beyond static images toward dynamic, interactive, and useful assets.

Dynamic NFTs: NFTs that change based on external data. Examples include a gaming NFT that levels up or a real-estate NFT that updates its metadata after renovations.
Fractionalized Ownership: High-value NFTs (like a rare digital art piece) can be split into many fungible tokens, allowing multiple people to own a share.
DeFi Integration: Using NFTs as collateral for loans in decentralized finance protocols, unlocking liquidity from dormant digital assets.
Soulbound Tokens (SBTs): A concept for non-transferable NFTs that represent credentials, affiliations, or achievements, acting as a digital résumé on-chain. The infrastructure is also improving, with Solana's Token-2022 program enabling advanced features like transfer hooks and confidential transfers, which platforms like Spawned utilize for features like perpetual post-graduation fees.

Frequently Asked Questions

Yes, anyone can save a copy of the digital file your NFT points to. However, they cannot copy the on-chain certificate of ownership. It's like taking a photo of the Mona Lisa—you have an image, but you don't own the original painting or its provenance. The value is in the verifiable, scarce blockchain record, not just the file itself.

Costs vary by blockchain. On Solana, minting fees are typically between $0.10 and $2. On Ethereum, 'gas fees' during minting can range from $20 to over $200 during network congestion. There may also be platform listing fees (often a percentage of sale price) and costs for decentralized file storage. Always have extra crypto in your wallet to cover transaction fees.

This is a critical risk if your NFT points to a traditional web URL. If that server goes offline, your NFT points to a broken link. Best practice is to use decentralized, permanent storage like IPFS (InterPlanetary File System) or Arweave. When minted properly, the NFT metadata points to a content identifier (CID) on IPFS, which is distributed across a network, not a single server, making it much more resilient.

In most jurisdictions, including the U.S., yes. Selling an NFT for more than you paid for it (in fiat or crypto value) is typically a taxable capital gain. Buying an NFT with cryptocurrency is also a taxable event for the crypto spent. You are responsible for reporting these transactions. Consult a tax professional familiar with cryptocurrency regulations.

Cryptocurrencies like Bitcoin or SOL are fungible—each unit is identical and interchangeable. NFTs are non-fungible—each token is unique and holds distinct information or value. Cryptocurrency is digital money; an NFT is a digital certificate of ownership for a unique item.

Some platforms offer 'lazy minting' or 'gasless minting,' where the NFT is prepared off-chain and only minted on-chain when it's first sold, transferring the fee to the buyer. However, there is always a blockchain transaction fee (gas) paid by someone to record the data permanently. Truly free minting does not exist, but costs can be minimized on chains like Solana.

Royalties are a percentage of secondary sales paid automatically to the original creator. They are programmed into the NFT's smart contract. For example, if an NFT with a 10% royalty sells for 1 SOL, the seller receives 0.9 SOL, and 0.1 SOL goes to the creator's wallet. Enforcement varies by blockchain and marketplace; some honor them, while others have made them optional.

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