A blockchain-based token representing unique ownership of a digital or physical asset - each NFT is distinguishable from every other and cannot be exchanged on a one-for-one basis.
Non-fungible tokens use blockchain smart contracts to certify unique ownership of a specific asset, whether digital art, collectibles, game items, domain names, or tokenised real-world assets. Unlike fungible tokens (where 1 ETH is identical and interchangeable with any other 1 ETH), each NFT has a unique identifier recorded on-chain. The NFT standard on Ethereum is ERC-721; the ERC-1155 standard allows semi-fungible tokens (useful for game items that can be produced in limited quantities).
NFT market activity peaked in early 2022 when aggregate monthly trading volumes exceeded USD 5 billion on platforms like OpenSea, LooksRare, and Blur. Collections like CryptoPunks and Bored Ape Yacht Club traded at floor prices of hundreds of ETH. The subsequent bear market saw 90%+ price declines for most collections, illustrating the speculative nature of the asset class.
For traders, the NFT market differs fundamentally from token trading: NFTs are illiquid (each sale requires finding a willing buyer at an agreed price), bid-ask spreads are enormous (floor price versus the listed price of specific traits), and wash trading has historically inflated volume figures on many marketplaces. Royalty enforcement has also weakened as competitive marketplaces eliminated creator royalties to attract traders. The most liquid NFT trading is done via bulk floor-sweeping on Blur's aggregator, which targets the lowest-priced available NFTs in a collection.
Worked Example
A collector buys a floor Bored Ape at 8 ETH (USD 24,000). Three months later, trait-driven demand for their ape's rare 'laser eyes' attribute pushes comparable sales to 14 ETH - a 75% gain in ETH terms. Selling on Blur costs a 0.5% marketplace fee plus any creator royalty (0–5% depending on enforcement). The bid-ask spread on the collection is 0.5 ETH wide - meaning they accept 13.5 ETH net. Total USD return depends entirely on where ETH itself traded during those three months, adding FX-like exposure on top of the NFT-specific move.
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