NFT

Most tokens are fungible: one unit is interchangeable with another, exactly like a banknote. An NFT is not — each token is individually identified, so it can represent a specific thing rather than an amount.

The critical detail is what the token actually contains. In almost all cases it holds:

• A unique identifier
• A record of the current owner's address
• A link to metadata, which in turn links to an image or file

The artwork is generally not on the blockchain — it is too large. The token points at it. If that hosting disappears, the token remains and points at nothing, which is not a hypothetical: it has happened to entire collections.

And the token, by itself, conveys no copyright. Unless the seller granted rights separately in a licence, the buyer owns an entry in a ledger saying they own the entry.

What the token gives you, and what it does not

The royalty enforcement problem

Creator royalties were presented as a defining feature: a percentage of every resale, paid automatically forever. In practice the royalty was almost always enforced by the marketplace, not by the token contract. When competing marketplaces made royalties optional to attract volume, the payments largely stopped. The lesson generalises well beyond NFTs: a right enforced by a voluntary intermediary is not a property right, however automatic it looks.

The market cycle, as a matter of record

• Trading volumes rose to tens of billions of dollars annually at the 2021–22 peak and then fell by well over 90%. A large majority of collections now trade below their mint price or have no bids at all.
• Reported prices overstated liquidity badly. Floor prices are the lowest ask, not a clearing price — a collection with a 5 ETH floor and one bid at 0.5 ETH has a "market cap" that is arithmetic fiction. This is the marks-are-not-exit-prices problem in its purest form.
• Wash trading was demonstrably widespread, inflating volume statistics on marketplaces that rewarded trading with token incentives.
• The cycle is a textbook case for the cost-of-trading arithmetic: marketplace fees plus gas plus a wide bid-ask created a hurdle that speculative turnover could not clear.

What the technology is actually good for

Separating the primitive from the speculation, a unique on-chain identifier is genuinely useful where the record itself is the point:

• Ticketing — transferable, verifiable, with resale rules enforceable at the venue rather than by a marketplace.
• In-game items — portable across applications that agree to honour them.
• Credentials and certificates — verifiable without contacting the issuer.
• Tokenised real-world assets — where the token is the legal claim rather than a pointer at a picture. That is the same architecture as a tokenised treasury, and the same caveat applies: the legal wrapper is the product, and the token is the record-keeping.

The lesson worth keeping

The recurring theme across this atlas is that the economic story and the legal claim are different objects, and only the second one survives a dispute. It applies to sukuk in a default, to tracker certificates in an issuer failure, to AT1 bonds in a resolution, and to FTX in a bankruptcy. NFTs made the point at retail scale and at speed: enormous sums were paid for claims whose content nobody had examined, and the examination would have taken one paragraph.

The formulas above are standard textbook formulations, simplified for teaching. They explain the mechanism — they are not a valuation tool, and they will not reproduce a dealer’s price.