What is an NFT (Non-Fungible Token)? Complete Guide

Non-Fungible Token (NFT), in its simplest definition, is a digital asset that has no other equivalent. It represents many unique digital assets from collectible items to virtual shoes, from virtual game content to digital properties. NFTs are produced using blockchain technology, mostly with Ethereum token standards. However, unlike cryptocurrencies, they operate on Ethereum's ERC-721 and ERC-1155 standards rather than the ERC-20 standard.

With the technological innovations of our age, owning digital products has become widespread among people, and more than 174 million dollars have been spent on NFTs since 2017. The supply-demand balance determines prices in NFTs, as with all valuable assets. Due to the uniqueness of NFTs, sold products are considered collectible items and their values are very high.

What Makes NFTs Valuable?

The fact that all NFTs contain unique information and are easily accessible reveals the advantages of digitally owning a product compared to a physical product with collection value. It prevents the production and reproduction of counterfeit products and ensures access to all information about the digital asset's authenticity, including its previous owner and producer.

Unlike crypto assets, NFTs cannot be exchanged among themselves. Their uniqueness ensures that each has separate characteristics and prevents two assets from being equivalent. NFTs can be thought of as football match tickets. Since each ticket will contain different stadium and date, teams to watch, seat location, and personal information of the ticket holder, and will provide its owner with a unique stadium view, all tickets are actually unique and therefore cannot be exchanged equivalently.

NFTs also enable artists to produce. It has facilitated the spread of digital artwork production by delivering their works worldwide and made it possible to bring buyers and producers together more easily by bypassing intermediary institutions. Additionally, in case the purchased work changes hands, the artist's rights are protected through copyright details, ensuring that the producer also gets a share in subsequent transfers. For example, actor William Shatner processed and sold digital cards consisting of his photographs. He also receives a share as the producer when these cards change hands.

Some other features of NFTs include: having a specific area for each - content bought for one game cannot be used in another game, inability to duplicate and fragment products, no possibility of deletion or modification since they operate on blockchain and with smart contracts, and the ability to transparently verify the authenticity of each product.

Examples of High-Value NFTs

Alien2089, a character from the CryptoPunk game which is one of the first produced NFTs, was sold for 605 Ethereum (equivalent to 6,455,000 TRY as of 27.02.2021) in January 2021.

The "Dragon" character in the game called CryptoKitty is worth 600 Ethereum (equivalent to 6,350,000 TRY as of 27.02.2021).

The "1-1-1" racing car in F1 Delta Time game was sold for 415.9 Ethereum (equivalent to 4,440,000 TRY at current price as of 27.02.2021) in May 2019.

The highest-valued NFT sale to date was achieved by crypto artist Beeple's "Everydays: The First 5,000 Days" which was auctioned at Christie's. The work became the first NFT sold at a historic auction house and signaled new institutional legitimacy for the evolving market. The digital artwork in jpg format, which is a compilation of Beeple's 5,000 pieces, was sold for $69.4 million (approximately 550 million Turkish liras) after the auction that began on February 25.