What Is An NFT And What Should Investors Know?

What Does Non-Fungible Mean?

Non-fungible means one unit can't be swapped for another of equal value. A $10 bill is fungible because any $10 bill works the same. A signed baseball card or a house is non-fungible because each one is different.

Cryptocurrencies such as bitcoin and ether are fungible. An NFT uses the same kind of blockchain but gives each token its own ID number, so the record shows exactly which item belongs to which wallet.

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How Do NFTs Work?

An NFT is created, or minted, by a smart contract, a program on a blockchain that assigns each token an ID and tracks its owner. When you buy an NFT, the contract moves that ID from the seller's wallet to yours, and anyone can see the change on a block explorer.

Most NFTs follow a technical standard so wallets and marketplaces can display them:

• Ethereum: ERC-721 for one-of-a-kind tokens and ERC-1155 for items that come in editions. Layer 2 networks such as Base and Arbitrum use the same standards with much lower fees.
• Solana: Solana NFTs trade on their own marketplaces. See Solana NFT marketplaces.
• Bitcoin: since January 2023, Ordinals inscriptions let people attach images and text directly to satoshis. See bitcoin NFTs.
• Polygon: Polygon has hosted brand and gaming NFTs. See Polygon NFTs.

The image or file itself is rarely stored on the blockchain because that would be costly. Instead, the token points to a link, often on a storage network such as IPFS or Arweave. If that link breaks, your NFT can point to nothing.

What Are NFTs Used For?

NFTs are used mostly for digital collectibles and art, with smaller uses in gaming, tickets and names. Here's where they show up today:

• Art and collectibles: profile-picture collections such as Bored Ape Yacht Club, VeeFriends and CryptoPunks, plus one-off digital art. See NFT profile pictures.
• Sports moments: NBA Top Shot sells licensed video highlights as NFTs.
• Gaming items: some play-to-earn games issue characters and items as NFTs that players can sell.
• Names and domains: ENS domains and Unstoppable Domains turn long wallet addresses into readable names.
• Brand tokens: some NFT brands have launched their own coins, such as Pudgy Penguins' PENGU in December 2024.

What Happened To NFT Prices?

NFT prices rose fast in 2021 and fell hard starting in 2022. In March 2021, Beeple's digital collage "Everydays: The First 5000 Days" sold for $69.3 million at Christie's, and Jack Dorsey's first tweet sold as an NFT for $2.9 million. When the buyer tried to resell the tweet NFT in April 2022, the top bid was 0.09 ETH, about $280.

The broader market followed. OpenSea, the largest marketplace, handled about $5 billion of NFT trades in January 2022. In 2026, its monthly NFT volume was a small fraction of that. In March 2026, OpenSea postponed its planned SEA token, which had been set to launch on March 30, citing challenging market conditions, and gave no new date. Big brands pulled back too: Nike closed its RTFKT NFT studio in January 2025.

A few collections still trade actively, and floor prices (the cheapest listing in a collection) are public on every marketplace. Our page on VeeFriends shows how one popular collection's floor fell about 90% in dollar terms from 2021 to 2026.

How To Buy An NFT

To buy an NFT, you need a wallet that supports the right blockchain, enough crypto to cover the price and network fee, and a marketplace. The steps are similar on every chain.

1. Pick the blockchain. Check which chain the collection is on, because that sets the wallet and coin you need.
2. Set up a wallet. MetaMask and Coinbase Wallet work with Ethereum and its layer 2s, and Phantom works with Solana and Ethereum. Our best crypto wallets and best Solana wallets pages compare options.
3. Buy crypto and send it to the wallet. Buy ETH or SOL on an exchange available in your country, such as Coinbase (US, UK, EU, Canada, Australia) or Kraken (US in most states, UK, EU, Canada, Australia), then withdraw it to your wallet address.
4. Connect to a marketplace. OpenSea, Magic Eden and Rarible are among the largest. Our best NFT marketplaces page compares fees and chains.
5. Check the collection, then buy. Confirm the verified badge and the contract address on the project's official site, because copycat collections are common. All sales are final.

Want to make your own instead? See how to create and sell NFTs.

Risks Of Buying NFTs

• Prices can collapse: most NFTs have no income or backing, and many 2021 collections now sell for a small fraction of their mint price.
• Thin trading: a collection may have few buyers, so you may wait weeks to sell or accept far less than the last sale.
• You may not own the art: buying an NFT usually gives you the token, not the copyright. Read the project's license.
• Broken links: if the image is hosted on a company server that shuts down, your token can point to nothing.
• Scams and phishing: fake mints, fake "claim" links and wallet-draining approvals are the most common ways NFT owners lose money. See common crypto and NFT scams and our crypto hacks tracker.
• Taxes: in the US, selling an NFT for a profit is taxable, and IRS Notice 2023-27 says some NFTs may be taxed as collectibles at up to 28%. See NFT taxes.
• Unsettled rules: regulators have debated whether some NFTs are securities. See are NFTs securities.

FAQ

What Is An NFT In Simple Terms?

An NFT is a digital certificate of ownership for one specific item, recorded on a blockchain. The blockchain shows which wallet owns that token and every past owner.

Can't Someone Just Screenshot An NFT?

Anyone can copy the image, but the copy doesn't change who owns the token on the blockchain. Buyers pay for the verified ownership record, much like a print of a famous painting isn't the original.

Do I Own The Copyright When I Buy An NFT?

Usually not. Most NFT sales transfer only the token, and the creator keeps the copyright unless the project's license grants you more rights.

Where Can I Buy NFTs?

NFTs sell on marketplaces such as OpenSea, Magic Eden and Rarible, and on brand sites such as NBA Top Shot. You need a crypto wallet and coins on the same blockchain as the NFT.

Are NFTs A Good Investment?

NFTs are speculative collectibles, and most lost value after the 2021 boom. Buy one only if you value the item or community for its own sake, with money you can afford to lose.

How Are NFTs Taxed?

In the US, buying an NFT with crypto is a taxable sale of that crypto, and selling an NFT for more than you paid is a capital gain. The IRS may treat some NFTs as collectibles taxed at up to 28%.