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Non-fungible tokens (NFTs) are a type of digital asset created on a blockchain. They can store art, collectibles, videos, music, live event tickets or other media. These assets may be viewed online or in galleries, where they are projected, but they are not tangible like traditional art pieces.
They are sometimes called "digital JPEGs" due to their association with images but also because metadata is linked via a code known as a hash, instead of being stored on-chain. The NFT’s data is often stored off-chain on a server or decentralized platform like InterPlanetary File System (IPFS), with only a code (hash) recorded on the blockchain.
Each NFT is assigned its unique identifier, ensuring its non-fungibility and authenticity. Unlike Bitcoin, where one BTC equals another, each NFT is distinct. Whether the token holds a one-of-a-kind original or is programmed with a limited supply is up to the artist.
Many NFTs are minted on layer-1 blockchains like Ethereum or Solana, while others use layer-2 solutions like Polygon, offering artists and consumers different options to suit their needs. Layer-1 blockchains are the primary networks, while layer-2 solutions, built on top of layer-1 chains, reduce costs and in many examples speed up transaction finality. Layer-2 solutions batch transactions and submit data to a layer-1, leveraging its security and trust. Transaction fees and speeds vary across chains, depending on network demand and blockchain design.
NFT values can be volatile carrying risks such as the potential for hacks or wash trading, reliance on third-party platforms, and are subject to regulatory changes. Some may be considered securities under Canadian law, subject to regulatory requirements. Like other crypto, NFT security is paramount, with best practices including two-factor authentication.
NFTs are often traded via online marketplaces, which had a surge of activity in 2021. The well-known auction house Christie’s made history with an NFT sale of $69,346,250 USD that same year. The art piece they negotiated was called Everydays: The First 5000 Days, by Mike Winkelmann, aka the digital artist Beeple. The sale made headlines for being its first paid for with Ethereum (ETH).
It’s hard to believe that the Beeple sale wasn’t the highest transaction, in fact he was outsold by another artist that same year who launched a creative project that raised $91.8 million USD. What made Murat Pak’s NFT, The Merge, gain attention is that consumers purchased units called “mass” over a 48-hour period. The NFT is a dynamic, evolving piece because of its tokenomics.
Like Satoshi, the creator of Bitcoin, The Merge’s artist remained anonymous, causing many to speculate that there could have been a team behind the idea. The Merge includes a burn mechanism, where tokens are periodically destroyed to reduce supply, potentially increasing scarcity. This may impact value depending on market demand.
The NFT market has experienced a shift in perceived values and consumers are not paying the same attention or sticker prices they were. In 2025, emergent NFTs trends are less about speculative investing and more about utility. Membership passes, gaming, and real-world integrations are giving NFTs new use cases. It remains unclear whether some of the many high-priced sales over the past years were genuine transactions or simply wash trades.
Wash trading happens when NFT creators or manipulators buy and sell their own tokens to fake high demand, thereby inflating prices. This market manipulation often involves one or more actors controlling both the buyer and seller wallets in a transaction. For example, a creator might sell an NFT between two wallets they own or control to make it seem valuable, attracting real buyers.
AI tools can flag wallets that buy and sell the same token within 30 days, but manipulators can also evade this detection by using multiple wallets or trading across platforms. Wash trading erodes trust in NFT marketplaces and can lead to financial losses for buyers. It can also harm legitimate creators by making it harder for their work to stand out.
Tools like Etherscan (an Ethereum blockchain transaction viewer) provide insight through searchable data bases. A seasoned NFT negotiator may look at the number of accounts trading the asset compared to its overall volume or perhaps how many times the NFT has been sold over a specific time horizon.
Bitcoin Ordinals, also known to many as Bitcoin NFTs allows digital artifacts to be inscribed directly onto the blockchain by using the Ordinals protocol. This innovation, introduced by developer Casey Rodarmor in January 2023, treats satoshis (or sats) as individual and tradable atomic units within the Bitcoin network.
Rodarmor’s work allows for sats to be individualized with anything digital including data, images, videos, and even software without using smart contracts. This could not have been feasible without the 2021 extra block space made with the Taproot and the Segregated Witness (SegWit) network upgrades.
Unlike Ethereum-based NFTs, which rely on smart contracts, Ordinals embed data directly onto Bitcoin’s blockchain. The trust factor offered by Bitcoin is an incentive however the variability of fees based on network demand combined with the size of the inscription can make Ordinals production costs higher than NFTs minted on low fee layer-2 sidechains.
Bitcoin Ordinals differ from Ethereum-based NFTs in terms of how they store data, their ecosystem support, and where they're traded.
Like NFT’s Ordinals carry risks, including high fees during network congestion, limited market liquidity, and regulatory changes. Some Ordinals may be securities under Canadian law.
Fungible tokens (or coins) are interchangeable and not unique to one another. Bitcoin (BTC) would be an example with the satoshi (sat) as its smallest unit (0.00000001), being equal in value and divisible. This is why BTC can be used as a medium of exchange and functions as of type of digital cash at specific retailers (in certain geographical regions) or through peer-to-peer transacting. Fungible tokens, or coins like Bitcoin[GU3] are volatile and subject to regulatory risks.
NFTs have the potential to enhance the high valued video game skins market and allow players to have more ownership of in-game items. With support from studios, gamers could one day seamlessly use their in-game objects across different platforms. For instance, a sword from Final Fantasy might be rendered and utilized in Fortnite, offering players new customization options while elevating the skins market. However, at this point it is still a fantasy. This type of interoperability although theoretically possible using blockchain would require industry-wide collaboration which we have not yet seen.
Musicians have started releasing exclusive tracks or albums as NFTs, sometimes including perks like concert tickets. Traditionally tickets have been increasingly difficult to purchase due to bot competition. NFTs are being used because they provide secure digital ticketing and may help curb scalping for events. More recently, these tokens have become keys to exclusive communities, granting holders access to private online groups or real-world VIP experiences. However, these use cases depend on platform reliability, regulatory approval, and market adoption.
Some projects leverage tokens to represent credentials, like digital diplomas or certificates, verified on the blockchain. As NFTs evolve toward practical applications in 2025, they continue to spark innovation in ways that strive to improve our visual and real-world experiences.
Visit our Knowledge Base to explore more blockchain topics and stay informed as this space develops.
