So an NFT is not the artwork itself, but a kind of digital certificate or signature. You can think of the NFT as a unique notation of who owns a particular thing. This thing can be, for example, a small pixel image like the now famous Cryptopunks, but also the very first Twitter tweet or digital music. The NFT serves as a certificate that states: person X is currently the owner of file Y, which is located at Internet address Z.
The abbreviation NFT stands for a non-fungible token. Without foreign words: a non-exchangeable token. A token is an asset, in simpler terms, a token. A counterexample to the NFT, i.e. a fungible, exchangeable token, would be a ten-euro bill. You can exchange this banknote at will for other ten-euro bills. The value and function of the banknote remain identical. (The serial number of the banknote is different – but that doesn’t matter for the purpose). A bitcoin or a beer token at the funfair would also be fungible tokens.
Now, what makes such a token non-exchangeable is that it is part of a blockchain. All transactions are publicly recorded in such a digital register. The blockchain is also distributed decentrally in different locations and represents a sophisticated accounting system. It is therefore not possible to transfer an NFT to someone else without authorization, without this transaction being visibly stored in the blockchain. The provenance history is therefore always clear – unlike with analog artworks, where provenance is often a problem. At the same time, the NFT records to which object it refers. Therefore, an NFT that refers to the picture of a cryptopunk is something different than an NFT that refers to the album of a music group.
Multiple NFTs can belong to one object. This may be by design when the NFTs are created. One use case would be “limited editions” of artwork, perhaps 1,000 copies of a graphic or piece of music. It is also conceivable that an NFT refers to a part of an object, for example, a tenth of a painting or a third of a piece of real estate. One problem: NFTs can also be created for an object without permission. The NFT Thefts initiative calls plagiarism, or pirated art, a growing problem in the NFT space.