What are NFT’s?

Ruben van Putten
5 min readApr 21, 2022

In the rapidly evolving blockchain industry NFT’s are on the rise. You may have seen the term NFT’s in the headlines lately, but what exactly are these NFT’s? And why this explosion of interest in NFT’s? What is their usefulness? We provide you with a clear explanation about what NFT’s are and more precisely how they work.

What is an NFT?

NFT stands for “Non fungible tokens”. This means that tokens are unique and cannot be replaced by anything else. The most cryptocurrency, like bitcoin, are fungible. You can trade one bitcoin for another bitcoin and it is the the market value of the token that matters. A non fungible item however, has unique information or attributes that make them irreplaceable or impossible to swap. The market value is whatever the market demands.

NFT’s are a type of cryptocurrency created on smart contract platforms. They are unique digital objects that can be owned and traded, like digital collectibles. You could think of it as digital Pokemon cards. NFT’s can create technical scarcity on the internet and they allow all new types of digital goods. They are making inroads into the realms of digital art, music and even new mass-markets of virtual NBA trading cards. And in the process, they are also making people rich.

So, actually a NFT is another great piece of decentralized tech for creating and exchanging value. NFT’s have financial value, can be stored, sold and bought like any other token or asset.

How does it work?

Now you know what an NFT is, you want to know how it works. NFT’s are secured with blockchain technology, similar what underpins Bitcoin and other cryptocurrencies. A blockchain is a decentralized alternative to a central database and are useful for keeping important records. Blockchains store information in encrypted form across a peer-to-peer network, which makes is difficult to tamper or hack it. NFT’s work on blockchain technology, but they are somewhat different from standard cryptocurrencies. Below we listed some important characteristics of NFT’s:

  • NFT’s are compatible with anything built using Ethereum
  • Each token has a unique identity
  • You can easily prove you own it
  • You can sell it, but they are never directly interchangeable with other tokens
  • You can easily prove you when you create it
  • You can earn royalties when you are a creator
  • Creators can decide the scarcity
  • You can hold it forever

NFT’s offer unique characteristics which make the assets different and scarce. When an NFT is created the creator gets to decide the scarcity of its asset. Creators can make each NFT completely unique to create scarcity or they can produce several thousand replicas. This element of digital scarcity or rarity makes this thing really interesting. NFT’s are secured with blockchain technology, similar what underpins Bitcoin and other cryptocurrencies.

Another interesting point is that when NFT’s are sold some will pay out royalties to their creators, which means that every time a NFT is sold the creator earns 8%. This is still a developing concept, but it it’s one of the most powerful. Think about it, as a creator you can just sit back and earn royalties when your NFT’s are sold from person to person. That’s a very attractive thought, is it not?

How do they disrupt the digital environment?

We think that NFT’s are really interesting. They can shake up our digital environment from what it is right now. In todays industry content creators see their profits and earnings potential swallowed by various platforms. The social platforms where the work gets published make the money, not the artists who created it. NFT’s change this field by enabling a new creator economy where ownership is baked into the content itself. Ownership is not longer in hands of the platforms and when creators sell their content the funds go directly to them, which is a huge benefit.

Furthermore, NFT’s increase the movement and tradability of assets. In gaming and other internet platforms NFT’s allow that items are easily transferable among users. The items can be freely sold and exchanged across ecosystems and the ownership stays protected. Physical assets come with the risk of theft or illegal duplication, NFT’s not.

Another important concept of NFT’s are tokenization. Due to their characteristics, NFT’s can be an excellent support for the tokenization of real life goods. This means creating a token that represents a good, thereby the token itself has no value. What are the benefits of tokenization? It will spare the need for intermediaries while getting many new features. Think of features like the list of previous owners, history of the value of the good or exhaustive list of its characteristics. All these features will make it a lot easier to check the authenticity of goods as well as making sure their owner is the real owner. Imagine when we tokenize real estate, who will then need notaries? And when we tokenize documents like passports fraud may not even be possible anymore. Our social network profiles could be open-source and exportable from one network to another. We could get full control and ownership over our own data, which will prevent third parties from stealing them. The tokenization of goods opens a wide range of possibilities for us.

The future of NFT’s

Today NFTs have become one of the fastest growing markets, behind DeFi. The use of NFTs are practically endless, as virtually anything can be represented digitally. Users have begun to exploit the possibilities, this created dynamism and liquidity leading to an explosion of trade with NFTs.

On platforms like OpenSea we can see all kinds of NFTs available and this is only the beginning.

People can buy and exchange rare NFTs from all over the world and we believe this provides enormous potential of this technology in the not too distant future.

The market size of NFT’s is still quite small, but with the technology used in it it is expected to bring about new changes in the blockchain world. Today there are still some barriers to mass adoption, because most NFT marketplaces require buyers to use a crypto wallet. According to blockchain.com less than 1% of the worlds population have a crypto wallet. But, when in the future these digital assets are more attainable for general public, NFT’s can bring millions of new users to the world of crypto and blockchain technology.



Ruben van Putten

Founder Qapital | PhD Researcher Informational Sequencing & Risk Propensity in Venture Capital