A non-fungible token, or NFT, is a blockchain token with an individual identity rather than interchangeable units. NFTs can represent digital collectibles, game items, tickets, and other records. On Ethereum, smart contracts track token ownership and transfers; the rights associated with a token depend on the application and its terms.12

Standards and ownership recordsReport an error

ERC-721 specifies how a contract identifies each token, records its owner, and authorises transfers. A token ID is meaningful together with its contract address: two collections can use the same number for different tokens. The standard includes individual approvals and operator approval covering an owner's tokens.3

ERC-1155 supports multiple token types within one contract, including both fungible and non-fungible assets. Its batch operations allow several token IDs and amounts to be transferred together. It is therefore a broader multi-token interface, rather than a requirement that every unit in a contract be unique.4

Metadata and the underlying assetReport an error

ERC-721's optional metadata extension provides a token URI that can point to a description and image resource. This separates the onchain token record from the material it references. A token can remain transferable while an external server changes or stops providing the associated content.32

The 2024 joint report by the US Copyright Office and Patent and Trademark Office distinguishes ownership of the token from copyright in an associated work. Buying an NFT does not automatically transfer copyright; a valid agreement may separately transfer or license rights. A record of a token's provenance also does not, by itself, establish that its issuer had the right to use someone else's work.2

Uses and royaltiesReport an error

Ethereum's documentation lists art, games, event attendance, credentials, access controls, and domain names among NFT applications. In these uses, other software interprets the token record and supplies the relevant experience or entitlement.1

ERC-2981 standardises how a contract reports a royalty recipient and amount for a proposed sale price. It does not itself force every marketplace to pay that royalty. The specification describes royalty payment as voluntary, so reporting royalty information and enforcing a payment are separate functions.5

RisksReport an error

Ethereum's documentation identifies phishing, contract vulnerabilities, and exposed private keys as NFT security risks. Transfer permissions also matter: an approved operator can exercise the authority granted by the contract. These risks concern the token account even when the artwork or other associated item is stored elsewhere.13

See alsoReport an error

ReferencesReport an error

  1. ^ a b c Ethereum.org. Non-fungible tokens. https://ethereum.org/en/nft/ 

  2. ^ a b c US Copyright Office and USPTO (12 March 2024). Non-fungible tokens and intellectual property: a report to Congress. https://copyright.gov/policy/nft-study/Joint-USPTO-USCO-Report-on-NFTs-and-Intellectual-Property.pdf 

  3. ^ a b c d Entriken, W. et al. (24 January 2018). ERC-721: Non-fungible token standard. https://eips.ethereum.org/EIPS/eip-721 

  4. ^ a b Radomski, W. et al. (17 June 2018). ERC-1155: Multi token standard. https://eips.ethereum.org/EIPS/eip-1155 

  5. ^ a b Burks, Z. et al. (15 September 2020). ERC-2981: NFT royalty standard. https://eips.ethereum.org/EIPS/eip-2981