Why are NFTs so popular? The complete guide you need to know.

First, let's look at the hottest NFT projects and quickly understand why they are valuable.

When it comes to NFT, many people's first reaction is “sky-high digital art.” But in fact, the value of NFT is far more complex than just being art pieces.

CryptoPunks is one of the oldest NFTs on Ethereum, launched back in 2017. This project consists of 10,000 unique 8-bit pixel art characters, each with different features and attributes. Interestingly, many celebrities have adopted CryptoPunks as their social media avatars, and this project remains a favorite among collectors to this day.

Bored Ape Yacht Club ( BAYC ) is another blockbuster. 10,000 hand-drawn cartoon apes, each one unique, and holders not only possess artwork but also gain access to exclusive events and virtual spaces. This model transforms NFTs from mere images into a complete experience and identity.

There is also Decentraland, a virtual reality platform built on Ethereum. The virtual land and in-game items here exist in the form of NFTs, and users can trade freely. This is seen as a pioneer of the metaverse and virtual real estate.

What exactly is an NFT? Simply put, it is a “unique digital item”.

To understand NFT, one must first clarify what “non-fungible” means.

Homogeneous assets are easiest to understand, like money. A 100-dollar bill is just a 100-dollar bill; there is no difference between any two 100-dollar bills, and they can be completely interchangeable. But NFTs are different; each NFT has unique characteristics and attributes, making them irreplaceable. Just like there are no two identical famous paintings in the world, each NFT has its own value.

It is precisely because of this uniqueness that NFTs have attracted so many collectors. What they want is not a copy, but something that is truly scarce and truly belongs to them.

An NFT is essentially a cryptographic token stored on the blockchain. It can represent any digital asset—artworks, in-game items, trading cards, virtual real estate, or even concert tickets. These assets are encoded into digital form and placed on the blockchain, becoming verifiable and tradable proof of ownership.

How do NFTs truly work? Blockchain and smart contracts are the key.

The underlying technology of NFT is blockchain. Blockchain provides a decentralized record-keeping system that clearly documents each transaction and ownership information. The transparent and immutable characteristics mean that the complete history of the NFT can be traced and verified, with authenticity and legitimacy being evident.

Another key aspect is smart contracts. These self-executing codes define the rules for the creation, management, and transfer of NFTs.

Token standards are also very important. The most common ones are ERC-721 on Ethereum and BEP-721 on the BNB chain. These standards ensure interoperability and consistency across different platforms, allowing NFTs to flow between different ecosystems.

The process of creating an NFT is called “minting.” In simple terms, it is turning a digital file into an asset on the blockchain through the power of smart contracts. When you purchase an NFT, you are actually acquiring ownership of a unique identifier (token ID) associated with that digital asset. This means you have exclusive rights to use, display, and interact with that asset.

What can NFTs do? There are many more application scenarios than you think.

A new way to monetize artwork

For artists, NFTs open up a whole new avenue for monetization. By tokenizing their works, creators can sell unique digital versions while retaining originality and scarcity. Collectors can also display, trade, and even lend their works in virtual galleries. The entire process is completely decentralized, with no intermediaries taking a cut.

Reconstruction of the gaming ecosystem

NFT games allow players to truly own in-game assets. Your items, characters, and skins are all NFTs that can be freely traded. Furthermore, virtual land can also be gamified. Players earn income through game achievements and asset accumulation, forming a real secondary market.

Passive income from staking

Some decentralized finance ( DeFi ) platforms now support NFT staking. NFT holders can use their assets as collateral while retaining ownership, earning interest in the process. This opens up new revenue streams for NFT holders.

Ticketing management innovation

Event organizers can issue NFTs as tickets, providing tamper-proof proof of attendance. NFT tickets can be transferred and resold without the need for third-party intervention. Even more interestingly, tickets can also be tied to exclusive benefits—access to VIP areas, limited edition merchandise, or special digital content.

Two Common Misunderstandings About NFT You Must Clarify

Misunderstanding 1: The security of NFT is absolute.

Blockchain itself does have a high level of security, but NFTs are not completely secure. There are still risks of fraud and deception, including phishing attacks, exploitation of smart contract vulnerabilities, and cases of counterfeit NFTs or misuse of copyrighted material.

Another risk is market volatility. Although some NFT prices have been outrageously high, the market often experiences extreme fluctuations and is full of speculative elements. Do not assume that NFTs have long-term value guarantees—like any investment, NFTs come with no safety promises.

It is also important to note that the security of an NFT depends on its native blockchain. The ecosystems and security of different blockchains vary, so the level of risk associated with NFTs can differ.

Misunderstanding 2: NFT is just cryptocurrency

Both are blockchain-based digital assets, but their purposes and characteristics are completely different. Cryptocurrencies are designed for ease of transactions and have fungibility—one Bitcoin is equal to another Bitcoin and can be exchanged on a one-to-one basis.

NFT is completely the opposite. It is a unique digital asset, and each NFT has different properties and characteristics, making them non-fungible and not directly interchangeable on a one-to-one basis. The value of an NFT derives from its uniqueness and scarcity rather than its trading functionality.

Conclusion: The true potential of NFTs is far greater than you can imagine.

NFT has fundamentally changed our understanding of digital ownership and value. Based on blockchain technology, NFTs establish verifiable proof of ownership, providing creators with new monetization opportunities and allowing collectors to own and display truly unique assets.

Of course, risks are real—fraud, market volatility, and technical vulnerabilities. But it is undeniable that the applications of NFTs are constantly evolving, from art, gaming, ticketing to virtual real estate, with many possibilities yet to be developed in the future.

Instead of blindly following trends or completely resisting, it is better to spend time truly understanding the essence and risks of NFTs before deciding whether to participate.