Let’s start by taking the two core properties of NFTs, breaking them down, and then applying them to the rest of these sections. All NFTs have these two things in common:

1. Non-Fungibility – all NFTs are unique assets that cannot be exchanged equally with other NFTs. Each NFT has a unique value that can make one worth $69 million and another worth $0.69 cents. While the NFT may be built on Ethereum, instead of operating on the ERC 20 (fungible Ether Coins), they run on either ERC 721 or ERC 1155 smart contacts that are unique to a specific associated item (image, piece of art, physical item, etc.)

a. Yes, there are other blockchains in use for NFT, but for simplicity’s sake, we will use Ethereum throughout the NFT section without any loss to the concepts discussed.

b. ERC 20 is what you get when you buy Ethereum on an exchange, and it is completely interchangeable with any other ERC 20. This is the completely fungible non-unique form of Ethereum.

c. ERC 720 & ERC 1155 are the two most common smart contracts used for NFTs that are minted. These are unique, non-fungible, and not interchangeable.

2. Separation of Asset and NFT – the NFT and asset (physical or digital) are two separate things. Think about a license or certificate of authenticity that comes along with a baseball card. The certificate of authenticity only has value in relation to the item it is certifying. If there is no item, the certificate would have relatively little, if not zero, value. This is a crucial concept to understand about the NFT space as many buyers don’t understand what they actually own when they purchase the NFT. In most cases, they don’t even own the copyright. They simply own the right to a specific image “#” as in the case of Beeple’s work.

a. This is an important concept because, unlike when you buy an Ethereum coin where the coin is the asset and value, the NFT is separate from the asset being purchased (i.e., NFT and a jpeg or NFT and a physical asset.)

Taking these to main concepts will help you to understand everything else you will read about NFTs. From valuation to the application of NFTs to physical assets, how long NFTs might be around, to where NFTs might go. We also understand that numerous other items can be added to this section; however, we believe these two main points will be more than enough for the vast majority of readers. 

If you have more detailed questions, we encourage you to reach out to us directly.