Understanding NFT as a Blockchain-Based Digital Ownership

Understanding NFT as a Blockchain-Based Digital Ownership

Non-fungible tokens (NFTs) have become one of the most talked about applications of blockchain technology today. But if you're new to NFTs, you might be wondering — what exactly do people mean when they say NFTs establish digital ownership?

In the previous article, we understood what NFTs are and how they differ from fungible cryptocurrencies. Now let's dive deeper into how NFTs establish digital ownership of unique assets on the blockchain.

Digital Ownership Before NFTs

Previously, artists and creators produced digital content like images, videos, music files etc. which could be easily copied and shared online for an infinite number of times. The core problem was that there was no concept of verified scarcity or ownership of digital assets.

Anyone could access, download or reproduce content that creators published online. It was almost impossible for creators to establish ownership over their digital works. There was no way to prove authenticity or trace the origin.

The Structure of an NFT

An NFT contains the following key components:

  • Smart Contract: This is the core building block acting as a certificate of ownership for the digital asset attached to the NFT. It contains all the data about the NFT and executes transactions through code.
  • Metadata: This JSON file contains important information that distinguishes the NFT like name, description, image, attributes, etc.
  • Token Standards: Popular token standards like ERC-721 (for collectibles) and ERC-1155 (for gaming assets) are used to create distinct categories of NFTs.
  • Blockchain Ledger: The blockchain network records all NFT transactions, validating ownership and preventing duplication. Ethereum is the most popular blockchain for NFTs currently.

How NFTs Establish Digital Ownership

NFTs allow creators to claim ownership of their digital creations in the following ways:

  • A unique NFT is minted by uploading the digital asset to the blockchain. This could be art, music, videos, or even tweets.
  • The smart contract assigns ownership of this specific NFT to the creator's crypto wallet address. This is recorded on the blockchain ledger.
  • Whenever this unique NFT is sold, the ownership is transferred to the new owner's wallet address via the smart contract code.
  • The transaction history shows previous owners of a particular NFT. This establishes provenance and verifies authenticity.
  • If a copy of the original digital asset attached to an NFT is made, it won't have the specific identity markers of the original making it less valuable.
  • The certified ownership allows creators to earn from secondary sales through programmed royalties each time their NFT is sold.

Benefits of NFTs for Digital Ownership

NFTs unlock several advantages when it comes to digital ownership:

  • Proof of Scarcity: The unique signature proves the scarcity of each NFT digital asset.
  • Verifiable Authenticity: Blockchain ledger provides the origin story and transaction history for each NFT.
  • Self-Sovereignty: Owners have sole control over their NFT assets without intermediaries.
  • Programmable Royalties: Creators earn royalty income each time their NFT is sold to a new owner.
  • Interoperability: Assets can move across different games/virtual worlds based on NFT ownership.
  • Fractional Ownership: NFTs can also represent fractional ownership of physical assets like real estate.

Real-World Use Cases of NFT Ownership

Here are some examples of how NFT ownership is being applied in the real world:

  • Digital Art: Artists can "sign" their digital artworks by minting them into NFTs to sell directly in the crypto market without intermediaries.
  • Collectibles: NFTs provide proof of ownership and authenticity for digital collectibles like trading cards, digital sneakers, etc.
  • Gaming Assets: In-game assets and skins can be represented as NFTs that players truly own and can trade outside games.
  • Licensed IP: Brands can license characters/logos by creating NFTs and earning royalties when their licensed NFTs are sold.
  • Physical Assets: NFTs enable fractionalized ownership of high-value assets like real estate where property rights can be complex.
  • Identity: Users have experimented with crypto wallets doubling up as digital identity verification using NFT profile pictures.


NFTs have become revolutionary by solving the complex challenges surrounding digital ownership. They allow creators to establish provenance for their digital works which can be easily copied otherwise. The blockchain-enabled uniqueness and authenticity of NFTs make them ideal for monetizing creative output.

For collectors, NFTs provide an opportunity to own verified limited edition digital assets with proof stored on the blockchain forever. As NFT adoption gains steam, they are primed to enable new economic and ownership models across industries. Their underlying concept of digital scarcity and ownership unlocks endless possibilities in the emerging metaverse landscape.