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Non-Fungible Token

06.09.21 08:48 AM By Bindya

What are Non-Fungible Tokens (NFT)?


Non-fungible token.

    Non-Fungible Token, Non-fungible, means these are unique and can not be replaced with anything. However, coins are fungible which means who can trade one for another and can have the same thing.

    Or we can say NFT is nothing but a unit of data stored on a blockchain that certifies the digital asset on a digital ledger to be unique and thus cant be interchanged. Any NFT can be copied and these copies are available for anyone but NFT are tracked on blockchain to give the owner the prof of ownership which is different from copyright. NFTs can be used to represent items like photos, audio, videos and other digital files. Most NFTs are build over Ethereum blockchain and NFT market was tripled in 2020 and the interest of buyers in NFT is growing ever since.

How NFT works? 

    NFTs are part of blockchain and most of these available at the time of writing this blog were build over Ethereum blockchain and these store some extra information that makes these work differently from the coin.

    These NFTs could be anything, a drawing, audio, video etc., however, this is different from regular art work as technology is used to sell this digital art. One can copy this digital file as many times as they want and also the art thats included in NFT but these NFTs are designed such a way that ownership of work cant be copied or altered. With this, every time a NFT is copied or is transferred from one to another, a percentage is paid to the original owner. When a buyer buys a NFT, they not only financially support the artist but also gets some basic usage rights and can post the piece or can use that as profile image or resell at their benefit. To understand this easily, we can say any NFT owner gets exclusive ownership rights. Any NFTs can have only one owner at a time. NFTs’ unique data makes it easy to verify their ownership and transfer tokens between owners. The owner or creator can also store specific information inside them. For instance, artists can sign their artwork by including their signature in an NFT’s metadata.

    Anyone can buy NFT and some popular NFT markets are, Rarible and Foundation. The platforms follow different verification processes for creators and listings, like Opensea and Rarible don't ask for owner verification for listing but Foundation only allows the creator to list upon invitation by a fellow creator. However, whichever platform one is using to list or buy, they have to keep in mind, the rules aren't stringent and they needed to be beware before buying.

    Buying NFT is no guarantee, the buyer would make money upon reselling. NFT value depends on what the buyer is willing to pay for it at that time and how many are interested in buying the same artwork. Also, NFTs are subject to capital gain taxes like any other stock you sell at profit.

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