An NFT is a token whose individual units are distinguishable from each other. Unlike one USDC being identical to every other USDC, each NFT has a unique identifier. The technology is useful; the speculative market that grew around it in 2021 was largely a casino. Both can be true.
What NFTs are technically
An NFT is a smart contract that lets each token instance have unique metadata — usually a pointer to an image, video, or data file. The token represents ownership of the metadata reference, not the underlying file itself. The file usually lives on IPFS or a centralised CDN. If the file host goes down, the NFT references nothing.
What NFTs are commercially
- Digital art — Bored Apes, CryptoPunks, generative art. Peak market in 2021–2022 saw individual pieces sell for $millions; the market has substantially deflated.
- In-game items — character skins, weapons, real estate. Practical use depends on game adoption.
- Music + creator economy — Sound, Catalog. Smaller market; persistent niche.
- Identity + credentials — soulbound tokens for diplomas, attendance certificates, profile pictures. Emerging.
- Domain names — ENS (.eth), Unstoppable. Functional; growing.
The 2021–2022 cycle
NFT trading volume peaked at ~$5B/month in early 2022. By late 2023 it had fallen to under $500M/month. Total NFT market cap dropped by an order of magnitude. The peak was driven by retail speculation and creator hype; the unwind happened as the speculation exhausted and the creator promises failed to materialise.
Today’s NFT market is roughly 10% of the peak by volume but includes more sustainable use cases (gaming, identity, smaller community-driven projects) and fewer pure speculation plays.
What buying an NFT actually gets you
Depends on the collection. Generally:
- Ownership of the on-chain token (verifiable)
- Display rights to use the linked image (often)
- Access to a Discord channel (sometimes)
- Eligibility for future airdrops or perks (sometimes)
- IP rights to commercialise the art (rarely — varies by collection)
It does not get you copyright, broadcast rights, or any guarantee about the underlying file’s availability.
The risks
- Liquidity collapse. NFT markets are thin. A floor price of $5,000 does not mean you can sell at $5,000 — it means the cheapest available is listed at $5,000. Actual sell-side liquidity below that is often zero.
- Wash trading. Significant historical NFT volume was wash trading — same entity buying and selling at inflated prices to manipulate metrics.
- Rug pulls. Many NFT projects abandoned promises after mint. The creator-airdrop-promised, never-delivered pattern is endemic.
- Storage risk. If the underlying file is on a centralised server, NFT references nothing when the server goes away.
- Tax complexity. NFT transactions have unclear tax treatment in many jurisdictions; record-keeping is your responsibility.
If you are considering buying
- Buy collections you would be happy holding even if liquidity dried up
- Verify the contract is the official one (impersonation contracts are common)
- Check the floor and recent sales for the collection — not just the headline mint or auction price
- Understand the IP / utility terms before purchasing
- Use a hardware wallet for material amounts
If you are considering creating
The NFT-as-monetisation playbook of 2021 does not work in 2026. The successful current creators treat NFTs as one channel within a broader creator strategy, not as the primary revenue source.