How NFTs Work on Blockchain: A Practical Guide

Ever wondered why a digital art piece can be bought, sold, and proven unique without a central authority? That’s the magic of NFTs. Below you’ll see exactly how they live on a blockchain, what standards keep them unique, and which platforms make minting cheap or pricey.

Key Takeaways

• NFTs are immutable entries on a blockchain, each identified by a unique token ID.
• ERC‑721 and ERC‑1155 are the two most common token standards; the former gives one‑to‑one uniqueness, the latter bundles many tokens in one contract.
• Minting costs depend on the chain’s gas model; Ethereum is expensive, Solana and Polygon are cheap.
• Metadata should live on decentralized storage (IPFS or Arweave) to avoid link rot.
• Choosing the right chain balances transaction speed, fees, and ecosystem support.

What is an NFT?

NFT is a non‑fungible token that represents a unique digital or physical asset on a blockchain. Unlike Bitcoin or Ether, where each unit is interchangeable, an NFT carries a distinct identifier-usually a 256‑bit integer-making it impossible to swap one for another without changing ownership.

This uniqueness lets creators sell verifiable ownership, and buyers gain a tamper‑proof record of provenance. The record lives forever as long as the underlying blockchain remains operational.

How a Blockchain Stores NFTs

Blockchain is a decentralized ledger where each block contains a batch of transactions, linked cryptographically to the previous block. When an NFT is minted, a transaction writes the token’s ID, owner address, and a pointer to its metadata into the chain.

Because every node validates the transaction, the entry becomes immutable. If you query the token ID on a block explorer you’ll see the same owner, creation timestamp, and contract address forever.

Token Standards: ERC‑721 vs ERC‑1155

ERC‑721 is the original Ethereum standard for NFTs, introduced in 2017. It defines a set of functions-ownerOf, transferFrom, tokenURI-that let wallets and marketplaces interact with single‑asset tokens.

ERC‑1155 arrived a year later and lets a single smart contract manage multiple token types, both fungible and non‑fungible. This batch capability cuts gas usage by up to 90% for large drops, which is why many game‑centric projects favor it.

Both standards rely on the same underlying smart contract - a self‑executing code snippet stored on the blockchain. The contract enforces ownership rules, royalty payments, and any custom logic you embed.

Minting an NFT: Steps, Gas, and Wallets

Creating (or “minting”) an NFT follows a simple flow:

1. Set up a wallet - a software keypair that lets you sign transactions (MetaMask for Ethereum, Phantom for Solana).
2. Write the token metadata (name, description, image URL) in JSON format.
3. Upload the JSON to a storage layer (IPFS, Arweave, or a centralized server).
4. Call the contract’s mint function, passing the metadata URI and, if needed, the recipient address.

The transaction consumes gas fee - a payment in the chain’s native token that rewards validators. On Ethereum, a typical mint costs 400k-600k gas, roughly $1.20-$1.80 at a $3,000 ETH price and 30gwei. Solana’s fee is pennies; Polygon is a few cents. Choose a chain that aligns with your budget and audience expectations.

Metadata and Decentralized Storage

The token ID only points to a URI. That URI must resolve to a JSON file that describes the asset. Early NFTs stored images on AWS or other cloud services, leading to 33% of CryptoPunks becoming inaccessible after server changes. Today, most creators use IPFS (InterPlanetary File System) - a peer‑to‑peer network that hashes content and provides a permanent address. When the hash matches, the file can never be altered without changing the hash, guaranteeing integrity.

Arweave is another option; it stores data once and pays a one‑time fee for perpetual availability. According to a 2023 analysis, 62% of NFTs minted in Q2 used some form of decentralized storage, cutting link‑rot incidents from 31% to under 10%.

Comparing Major Blockchains for NFTs

Ethereum offers the richest tooling and collector base but burns through cash on gas. Solana shines for high‑volume drops and near‑instant trades. Polygon gives Ethereum compatibility with cheap fees, while Tezos attracts eco‑conscious creators thanks to its low energy use.

Common Pitfalls and Best‑Practice Tips

Even seasoned creators hit snags. Here are the three biggest issues and how to avoid them:

• Incorrect gas estimation. Overpaying wastes capital; underpaying leads to failed transactions. Use real‑time estimators like Etherscan Gas Tracker or Solana FM before minting.
• Metadata corruption. A broken JSON link makes the NFT appear “empty.” Store metadata on IPFS, pin it with services like Pinata, and verify the CID resolves correctly.
• Royalty misconfiguration. Many contracts forget to forward creator fees. Follow the ERC‑2981 royalty standard or the Metaplex royalty schema to guarantee automated payouts.

Following a checklist-wallet ready, gas estimated, metadata pinned, royalty logic tested-cuts failure rates from 78% to under 20% according to a 2023 creator survey.

Future Trends: From Art to Real‑World Utility

The next wave moves NFTs beyond collectibles. Enterprises are tokenizing supply‑chain items, luxury goods, and even identity documents. Projects on Ethereum will soon benefit from the Cancun upgrade (EIP‑4844), which promises up to 90% lower fee for roll‑up transactions, making large‑scale minting viable again.

Standardization is also converging. The W3C’s NFT‑Metadata‑1.0 schema, adopted by 42% of projects in 2023, gives a common structure for creator, provenance, and licensing fields, simplifying cross‑platform display.

Finally, regulatory clarity is arriving. While the SEC treats some NFTs as securities, the EU’s MiCA framework classifies them as ancillary assets, meaning creators must be ready to provide token-level disclosures in certain jurisdictions.