What is an NFT in Simple Terms - How It Works and How to Profit - NFT Platforms Overview

What is an NFT?

In recent years, NFTs have somewhat lost their former glory: while previously many non-fungible tokens were created daily, with prices for some reaching millions of dollars, and a plethora of NFT platforms and advertising campaigns existed. However, by 2025, the situation in the NFT sector is underwhelming: trading volumes for non-fungible tokens are falling, and items that once cost a fortune are now significantly cheaper. Nevertheless, non-fungible tokens remain a fairly promising invention with many areas of application. In this article, we will take a detailed look at what NFTs are, how they work, where they are used, ways to make money from them, and the prospects for this technology's development in the near future.

What is an NFT and why is it needed

NFT (Non-Fungible Token) is a unique digital token that represents ownership of a specific object or content. Unlike fungible tokens such as BTC or ETH, each NFT is unique and cannot be replaced by another token on a one-to-one basis.​

NFTs can be used to confirm the authenticity and ownership of digital assets such as works of art, music, videos, game items, and even virtual real estate. They allow creators to monetize their work and buyers to be certain of the uniqueness and authenticity of the purchased content.

Furthermore, non-fungible tokens can be used as a person's passport or a vote in an election—essentially anything that confirms the authenticity of something. However, NFTs have not, so to speak, reached the masses: for some reason, their use today is very limited, although, in theory, the development is quite unique—it could be used to implement many ideas and concepts.

How NFTs Work

The foundation of NFT is blockchain technology—a distributed database that ensures transparency and the immutability of records. Each NFT contains a unique identifier and metadata stored on the blockchain. This provides the ability to verify the token's authenticity and track its ownership history.​

The most common platform for creating and trading NFTs is Ethereum, but other blockchains such as Solana, Tezos, and Binance Smart Chain are also used. Smart contracts running on these platforms automate the processes of creating, transferring, and selling NFTs.

As mentioned, regular cryptocurrencies can be exchanged for one another: for example, if a person has 1 BTC and exchanges it for another, they will still have 1 BTC. In this regard, each NFT is unique and cannot be equivalently replaced by another unless two parties agree on a price and decide to swap non-fungible tokens.

How files are converted into NFT tokens

The process of creating an NFT is called "minting." It involves the following steps:​

1. Choosing a platform: OpenSea, Rarible, Mintable, and others;
2. Creating a crypto wallet: for example, MetaMask or Trust Wallet;
3. Uploading a digital file: image, video, audio, etc.;
4. Setting parameters: title, description, royalties (percentage of subsequent sales);
5. Paying a commission: for creating the token (gas fees), especially on the Ethereum network.​

After completing these steps, the NFT becomes available for sale or transfer to other users.

The entire problem with anything used within an NFT is that non-fungible tokens are not recognized by any countries as official confirmation of ownership. For example, if you obtained an NFT with the rights to a composition and wanted to receive a percentage for its use elsewhere. But those who use the composition can legally refuse to pay you anything, as an NFT is not officially a method of confirming ownership rights.

Where NFTs are used

Let's consider several areas of application for non-fungible tokens:​

1. Art: digital paintings, photographs, animations;
2. Music: albums, singles, exclusive tracks;
3. Gaming: in-game items, characters, skins;
4. Fashion: virtual clothing, accessories, collections;
5. Real Estate: virtual plots of land and buildings in metaverses;
6. Education: certificates, diplomas, qualification confirmation;
7. Identification: digital ID cards, passports;
8. Medicine: medical records, case history, prescriptions.

Two areas in this list that are unclear how they ended up here are education and medicine. After all, state institutions rarely resort to NFT solutions, although they actively use blockchain technologies.

Ways to earn money with NFTs

Reselling tokens

One of the most common ways to earn money on NFTs is buying tokens and subsequently selling them at a higher price. This requires market analysis, an understanding of trends, and the ability to predict which tokens might increase in value.

This type of earning is available even in 2025: and although NFT hunters will not get the same profit from reselling today as they could have several years ago, it doesn't mean there is none at all.

Creating your own token

Artists, musicians, and other creators can create their own NFTs and sell them directly to buyers. This allows them to monetize their creativity and establish a direct connection with the audience.

It is worth noting that this option should only be considered by people who truly have something to offer. There are hundreds of thousands of NFTs on the market that no one needs, as they were made by ordinary people capturing simple images or something else. Of course, there have been cases where an ordinary person earned well on a newly created NFT, but this is more of an exception than the rule.

Services for token authors

Developers, designers, and marketers can offer services for creating, promoting, and selling NFTs for others. This includes developing smart contracts, designing tokens, marketing campaigns, and other related services. Perhaps this is the most realistic way to earn money on non-fungible tokens today.

Risks and pitfalls in NFT

The NFT market is associated with certain risks:​

1. Fraud: fakes, phishing sites, plagiarism. Essentially, everything that applies to the crypto market applies to NFTs. You can easily purchase a fake disguised as an original non-fungible token valued by the community;
2. Market instability: prices for NFTs can change drastically. Even regular cryptocurrencies cannot provide such competition in volatility, because at one moment NFTs simply stopped being worth anything;
3. Legal issues: copyrights, taxation, regulation. As already mentioned, legally, an NFT does not act as confirmation of ownership of any item or intellectual property;
4. Environmental aspects: high energy consumption when creating tokens on certain blockchains.​ This risk is more related to the rhetoric of people who are also concerned about Bitcoin mining, yet people do not stop mining it.

Who buys NFTs and how much they cost

NFTs are acquired by very different categories of users:

1. Collectors – looking for rare and valuable specimens;
2. Investors – view tokens as a speculative asset or a long-term investment;
3. Fans – buy tokens of their favorite artists, bloggers, or brands;
4. Gamers – acquire in-game items and characters;
5. Brands – release their own NFTs as part of advertising campaigns or loyalty programs.

The cost of an NFT depends on many factors: uniqueness, the author's fame, the relevance of the topic, limited release, hype, and even memes. Prices range from a few dollars to millions. For example:

• The most expensive NFT to date is "Everydays: The First 5000 Days" by the artist Beeple, sold for $69.3 million;
• One of the CryptoPunks was purchased for $23.7 million;
• The average market price is from $10 to $300, but rare NFTs can cost significantly more.

Where NFTs can be bought and sold

Special platforms and marketplaces exist for buying and selling NFTs. Here are the most popular ones:

1. OpenSea – the world's largest NFT market with millions of tokens and support for Ethereum, Polygon, Arbitrum;
2. Rarible – a platform with decentralized governance (DAO) and the ability to create NFTs without coding knowledge;
3. SuperRare and Foundation – more elite platforms for digital art;
4. Binance NFT – a marketplace from the Binance crypto exchange with support for several blockchains;
5. Magic Eden – a popular platform based on Solana, focused on gaming NFTs and collections.

What is happening with NFTs in 2025

Although the future of this sphere is foggy, at the current moment (spring 2025), NFTs are no longer perceived as just "pictures for millions." It is a full-fledged tool for digital ownership, assets, and identification.

Key trends:

• Massive implementation in Web3 and DeFi – NFTs are used as collateral for loans, as part of DAOs, and for service access;
• Brands and corporations – Adidas, Nike, Starbucks, Coca-Cola, YSL, and others integrate NFTs into their marketing strategies and loyalty programs;
• Integration of AI and NFT – tokens are being created that can react to external data and user actions;
• Education and employment – diplomas, resumes, and achievements are recorded in NFTs, verifiable by employers.

Many experts believe that in the next 5-10 years, NFTs will become an integral part of every person's digital identity: from medical data to driver's licenses.

Conclusion

NFT is not just a fashionable digital trend, but a technology with enormous potential that is already changing conventional ideas about ownership, creativity, and digital interaction. In 2025, it moves beyond collectible tokens and becomes part of the Web3 ecosystems, metaverses, education, finance, and even government management.

One can only hope that such a promising development will not remain on the sidelines of the crypto market but will find its own application and a multitude of consumers.