A non-fungible token (NFT) is a unique record on a blockchain that asserts ownership of a specific item, digital or physical. "Non-fungible" means it cannot be exchanged one-for-one with another token the way one bitcoin can be swapped for another — each NFT has a unique identity.
What an NFT actually proves ownership of depends entirely on the project. Most NFTs link to a file stored off-chain (on IPFS or a company server). Owning the NFT is owning the blockchain record, not necessarily the image or content itself, and if the hosting disappears the link can break.
The NFT market saw an extraordinary boom in 2021 and a sharp collapse afterward. Like any speculative market, prices are set by what buyers will pay, not by any intrinsic production cost or utility. Evaluate the community, utility and creator credibility, not just recent price action.
Worked example
A CryptoPunk NFT is a unique 24x24 pixel character with on-chain provenance; owning the NFT means owning that specific blockchain record, not copyright over the image.
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This definition is general education, not investment advice. Markets — especially crypto — are volatile and you can lose money. Please read our disclaimer and see our methodology.