An NFT (non-fungible token) is a token with its own identifier and a non-interchangeable role within a given system. The token is recorded on a network ledger; an associated image, video, or ticket may be stored elsewhere, while any rights depend on separate legal terms.
In plain terms — Buying an NFT means obtaining control of the token under the contract's rules. It does not automatically mean buying the copyright, the original file, or a guarantee of value.
Token, content, and rights are three different objects
The token is identified at least by its network, contract address, and token
ID. The contract records who may transfer it and may expose an address, often
called a tokenURI, from which an application reads the metadata: name,
description, attributes, and a link to the content.
Metadata and media may be stored on-chain, in a distributed system, or on a server controlled by someone. An immutable record may therefore point to content that can change or become unavailable. The opposite is also possible: a work may continue to exist while the token or the market that displayed it loses its utility.
The third layer is legal. Owning the token does not by itself transfer copyright or other rights in the work. The licence, project terms, sale contract, and applicable law determine whether the holder may, for example, display, commercially use, or reproduce the content.
From mint to transfer
When an NFT is minted, the contract creates or assigns the token under its rules. A later sale may take place through a marketplace, an auction, or a direct exchange. The on-chain transaction records the token transfer; the price, order, payment, and fees may be handled wholly or partly by other contracts and systems.
Before signing, read which action is being authorised. Permission granted to an operator may allow it to transfer one NFT or all compatible NFTs held by the account that granted approval. A fake website can exploit exactly this kind of seemingly innocent approval: Wallet drainer explains the risk.
Burning an NFT normally sends the token to an address from which it can no longer be transferred, or reduces the supply under the contract's rules. It does not necessarily delete the metadata, the linked file, copies already downloaded, or third-party rights.
ERC-721, ERC-1155, and royalties
ERC-721 defines an interface for identifying, owning, and transferring non-fungible tokens on Ethereum. Its metadata extension is optional. ERC-1155 allows one contract to manage several token types, both fungible and non-fungible, and supports batch transfers. A technical standard does not prove authenticity, content quality, or ownership of rights.
ERC-2981 allows a contract to communicate the recipient and suggested amount of a royalty on a sale. It does not, however, require every marketplace to pay it: the standard provides the information, while payment depends on the sale mechanism and the rules applied by the venue.
The label “NFT” does not determine legal treatment on its own. Within the European MiCA framework, crypto-assets that are genuinely unique and non-fungible are distinguished from fractions, large series, or collections that may be substantially fungible. Actual characteristics and rights matter, not only a unique identifier.
Price, liquidity, and risks
The floor price displayed for a collection is the asking price set by sellers for some items, not a guaranteed value for every token. Traits, provenance, executable bids, holder concentration, creator activity, and market conditions can produce very large differences.
The net result includes purchase and sale prices, gas or network fees, venue fees, any royalties, and slippage. Wash trading uses trades without a genuine change in economic interest to simulate demand. Price and volume should therefore be read alongside counterparty distribution and transaction history.
Risks associated with the contract and its administrative powers, custody, metadata, platform, licence, and wallet security remain separate. For an unsolicited NFT airdrop, do not open attached links, use an unknown website to interact with the token, or sign a related request merely out of curiosity: these actions may lead to phishing or a malicious authorisation.
Professional level: a layered review
A reproducible review starts with the contract address and network, not the name shown by a marketplace. It then reconstructs the supported standards and functions, token ID and supply, mint and transfer events, administrator identity and powers, URI, and whether metadata can be changed.
Only then does it connect the licence and rights, content preservation, provenance, required approvals, venue, costs, and observable liquidity. For large or fractionalised series, it adds the legal classification in the relevant jurisdiction. A historical analysis records these elements on a point-in-time basis: an upgradeable contract, a remote file, or marketplace terms may change after the observation date.
The final question is not “how rare is it?”, but what evidence remains valid if the interface, issuer, or market disappears. Token, content, and rights must be assessed separately before assigning them a common price.
Sources
- Ethereum Improvement Proposals — ERC-721 — Interface for identifying, owning, transferring, and exposing the optional metadata extension of non-fungible tokens.
- Ethereum Improvement Proposals — ERC-1155 — Multi-token contracts, batch transfers, and management of fungible and non-fungible units.
- Ethereum Improvement Proposals — ERC-2981 — Royalty signalling and the voluntary nature of marketplace payments.
- European Union — Regulation (EU) 2023/1114, MiCA — Recitals 10–11: uniqueness, fractions, series, collections, and substance over form.
- ESMA — Guidelines on the qualification of crypto-assets as financial instruments — European criteria for distinguishing technical form, actual rights, and possible qualification as a financial instrument.
- WIPO — Non-fungible tokens (NFTs) and copyright — The distinction between the token, the work, its licence, and the transfer of copyright.
- IOSCO — Policy Recommendations for Crypto and Digital Asset Markets — Conflicts, market integrity, custody, disclosure, and operational risks at crypto-asset trading venues.
- FBI — Fraudulent NFT airdrops — Airdrops, links, and wallet-connection requests used to steal credentials or assets.
Links
Crypto-assets and digital assets · Blockchain transactions · Smart contract risk · Crypto wallet · Digital assets and crypto markets