A non-fungible token or NFT is a type of digital token. This type of token can’t be interchanged or replaced as every token comes with unique attributes. Understanding how NFTs work is very important. However, to do that, we need to look into the fundamentals behind this technology. NFTs use public blockchain platforms to function. At this time, Ethereum is the most popular public platform that many of the NFT projects are using for storing or minting NFTs. Due to using blockchain, transparency regarding NFT ownership is high, as anyone can see the ownership status. ERC-721 and ERC-1155 are the only 2 token standards that can help create NFTs. To help you better understand how NFT works, we at 101 Blockchains offer an array of courses that will help you better comprehend the topic. More so, we have an exclusive course on NFT, where we cover every single element within the ecosystem. The following courses will help you learn about NFTs-> NFT Fundamentals Course https://academy.101blockchains.com/courses/nft-fundamentals Ethereum Development Fundamentals Course https://academy.101blockchains.com/courses/ethereum-development-fundamentals Learn more about the certification courses from here -> Certified Enterprise Blockchain Professional (CEBP) course https://academy.101blockchains.com/courses/blockchain-expert-certification Certified Enterprise Blockchain Architect (CEBA) course https://academy.101blockchains.com/courses/certified-enterprise-blockchain-architect Certified Blockchain Security Expert (CBSE) course https://academy.101blockchains.com/courses/certified-blockchain-security-expert Learn more from our guides -> https://101blockchains.com/non-fungible-tokens-nft/ https://101blockchains.com/nft-minting/ https://101blockchains.com/buy-and-sell-nfts/ https://101blockchains.com/nft-in-blockchain/ https://101blockchains.com/nft-marketplace/ https://101blockchains.com/types-of-non-fungible-tokens/ https://101blockchains.com/nft-attributes/ https://101blockchains.com/best-nft-wallets/ https://101blockchains.com/sell-nfts-on-shopify/

1. HOW NFT WORKS
101blockchains.com

2. Definition of
NFT
A non-fungible token or
NFT is a type of digital
token.
This type of token can’t be
interchanged or replaced
as every token comes with
unique attributes.

3. How NFT Works Blockchain Platform
Token Standard
Key Characteristics
Value Creation
Marketplace and Wallet

4. NFTs use public blockchain platforms to function. At this time,
Ethereum is the most popular public platform that many of the
NFT projects are using for storing or minting NFTs.
Other platforms such as NEO, TRON, or EOS blockchain
platforms are also capable of creating NFTs.
All information regarding NFTs is stored on the ledger. File links,
owner’s identity, metadata, date of creation, unique
characteristics are stored on the ledger.
Blockchain Platform

5. Typically, only the creator of the NFT can select the scarcity
level of the NFT.
As the blockchain platform is immutable, no one can
duplicate or delete NFTs from the ledger once it gets
added.
Due to using blockchain, transparency regarding NFT
ownership is high, as anyone can see the ownership status.
Blockchain Platform

6. Token
Standard -
ERC-721
It’s a non-fungible token standard
that defines the process of creating
an NFT on the Ethereum platform. It
allows users to manage, own and
trade NFTs and can also represent
asset ownership.
ERC-721 is one of the common
Ethereum token standards used in
developing NFTs.

7. Token
Standard -
ERC-1155
ERC-1155 token standard is a
multi-token standard, which
means developers can use it to
develop NFTs, fungible tokens, or
any other form of tokens.
It allows users to create various
tokens using a single contract.
This token standard also requires
less computational power.

8. Key
Characteristics
Indivisibility
Rarity
Uniqueness
Ownership
Transparency
Interoperability

9. NFT
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Indivisibility You can’t divide NFTs. It means
you can’t divide a single token
into multiple smaller tokens.
Therefore, users can’t partially
own an NFT or even sell an NFT.
Users can only own a full NFT, and
only a single person can own that
NFT.

10. Rarity
All NFTs need to be rare. This
attribute is necessary as it drives
their value in the marketplace.
Creators need to keep in mind
that they can develop many
NFTs, but they need to maintain
a limit to promote scarcity.

11. Uniqueness NFTs have to be unique. This
means that every single token will
come with individual
characteristics that will differ from
one another.
Therefore, you can’t interchange
one NFT with another as they don’t
have similar traits.

12. Ownership NFTs come with ownership status.
Creators will have full control over
the NFTs they are minting. Anyone
buying the NFT will own it, but the
original creator will remain the
copyright.
In any case, the owner is free to
transfer their NFTs to any other
account. In that case, the ownership
status will change.

13. Transparency As NFTs use public blockchain
platforms, they are fully
transparent.
It means every transfer or activity,
or ownership status is public on the
ledger.
This attribute is necessary as it
helps the NFTs to create trust.

14. Interoperability You can create or buy NFTs on
various blockchain platforms or
even DLT based platforms.
Therefore, you can buy NFT from
one platform and sell it on another.
It improves their interoperability
and liquidity.

15. Value Creation The value of an NFT depends on the
uniqueness of that NFT and the
creator’s profile.
Companies with high brand value
and famous creators will drive
more value to their NFTs. Other
than this, the utility of the NFT can
also increase the pricing.

16. Value Creation
A creator of an NFT will get sole
copyright and can duplicate their
work as much as they want.
Duplicated NFTs are considered
unique but will not have a similar
value as the original one.
The creator also gets royalties. The
buyer of an NFT will get a license to
display the NFT and can even resell
it. But they can’t make changes or
duplicate the NFTs.

17. Marketplace
and Wallet
To mint or store their NFTs, you will
need to have an NFT wallet.
Without a blockchain or NFT wallet,
you can’t store your NFTs.
These wallets can safely store all
your NFTs in one place. However,
you need to choose a wallet that
supports your NFTs.

18. Marketplace
and Wallet
NFT marketplaces allow users to
buy and sell their tokens on the
platform. In some cases, users can
mint new tokens on the platform.
Not all marketplaces support every
type of NFT. These marketplaces
offer lifetime royalties to the
creators for every resell.
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19. Learn More About NFT
NFT Fundamentals Course
https://academy.101blockchains.com/c
ourses/nft-fundamentals
Ethereum Development
Fundamentals
https://academy.101blockchains.com/courses/et
hereum-development-fundamentals

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Blockchain Professional
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Blockchain Architect
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Security Expert
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ses/certified-enterprise-blockchain-
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https://academy.101blockchains.com/cours
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courses/blockchain-expert-
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