<p>A non‑fungible token (NFT) is a unique digital asset recorded on a <a href="/NewSite/encyclopedia/blockchain/" class="ency-link">blockchain</a> that represents ownership of a specific item such as artwork, music, video, or virtual real estate.</p>

<h2>How It Works</h2>
<p>An NFT is created, or minted, by deploying a smart contract on a blockchain that supports token standards like ERC‑721 or ERC‑1155, most commonly on <a href="/NewSite/encyclopedia/ethereum/" class="ency-link">Ethereum</a>.</p>
<p>The smart contract assigns a distinct identifier to each token, ensuring no two tokens are identical.</p>
<p>Metadata linked to the token describes the asset, often stored off‑chain with a reference such as an IPFS hash.</p>
<p>Ownership is transferred by sending the token to another wallet address, a transaction recorded immutably on the blockchain.</p>
<p>Because each token is non‑fungible, it cannot be exchanged on a one‑for‑one basis like cryptocurrencies; its value depends on the underlying asset’s rarity, demand, and provenance.</p>

<h2>Why It Matters</h2>
<p>NFTs enable creators to monetize digital works directly, receiving royalties automatically through programmable smart contracts.</p>
<p>Collectors gain verifiable proof of authenticity and ownership, reducing fraud in markets for digital art and collectibles.</p>
<p>For example, an artist can sell a limited‑edition digital painting as an NFT, retain a percentage of future resale prices, and reach a global audience without intermediaries.</p>
<p>Beyond art, NFTs are used in gaming for unique in‑game items, in real estate for tokenizing property deeds, and in identity management for verifiable credentials.</p>
<p>As blockchain adoption grows, NFTs illustrate how tokenization can create new economic models for digital scarcity and ownership.</p>