Overview on Non-Fungible Tokens (NFTs)

Xumit Capital
6 min readDec 13, 2021


“Non-fungible tokens (NFTs) are cryptographically unique tokens that are linked to digital (and sometimes physical) content, providing proof of ownership. NFTs have many use cases, including artwork, digital collectibles, music, and items in video games”. Cryptocurrencies are gaining popularity day by day and NFTs are one of the fastest growing sectors in the crypto industry.

NFTs in simpler terms mean “digital assets that contain identifying information recorded in smart contracts”. This is what makes NFTs unique, unlike other fungible crypto tokens. Non-fungible means that it is unique and cannot be directly replaced by another token. Other cryptocurrencies such as bitcoin or even cash in this regard are called fungible because replacing one bitcoin with another one or replacing a Rs. 500 note with another Rs. 500 can be simply exchanged without any difference in value.

NFTs are not divisible. Think of a painting in this sense. If you split a painting, it loses its value and is something that cannot be redeemed. Similarly, NFTs are not divisible since the value of the digital asset would be worth nothing if they are split and divided. However, there is talk ongoing of having fractionalized NFTs but there is still no clarity whether it would happen anytime in the near future.

What makes NFTs so special is that they have unique characteristics. First and foremost, NFTs are usually linked to a specific asset. They can be used to prove the ownership of digital items like game skins (a graphic which changes the appearance of characters in video games) all the way to the ownership of physical assets such as paintings. A concern that a few individuals have is around the authenticity and validation of NFTs. However, due to the blockchain ledger showcasing each and every transaction of tokenized assets, NFTs are instantly able to verify who created what, when, and where. Therefore, the blockchain ledger provides a ‘certification of authenticity’.

Secondly, as indicated earlier, NFTs are non-fungible, meaning that they cannot be replaced with another NFT. To explain this in a simpler way, think of a painting by Leonardo da Vinci and a painting by Pablo Picasso. You can probably argue that one artists’ paintings might be better or more valuable than another but you cannot place a value on either without knowing what the demand and supply would be. Hence, you cannot exchange them with each other as they are not of the same value. This is what makes NFTs unique and non-fungible.

NFTs can be used for a plenty of different purposes. One of the most notable uses include being used for digital assets that need to be differentiated from each other in order to prove their value or scarcity. NFTs are bought and sold on designated NFT marketplaces such as OpenSea and Rarible. However, known crypto exchanges such as Binance and Coinbase have announced their own plans for a NFT marketplace. NFTs can be created on smart-contract enabled blockchains and their smart contracts allow for detailed attributes to be added, such as the owner of the token and secure file links. A key benefit of NFTs is that they prove digital ownership of the asset and hence, it makes it a really important feature in this increasingly and evolving digital world. “Tokenizing real-world tangible assets such as paintings and real estate allow them to be bought, sold, and traded more efficiently whilst reducing the probability of fraud”. NFTs are still in their nascent stage and as time evolves, people will get a better idea regarding its uses and benefits.

Currently, most of the NFTs are created on the Ethereum blockchain. For one to create an NFT, they need a mobile enabled wallet. In order to perform transactions on the Ethereum network, one needs to have NFTs in their digital wallet, a cryptocurrency that can be bought on platforms such as Coinbase and Binance. In order to sell NFTs, you need to go to a NFT marketplace such as OpenSea or Rarible and go to the asset page and click sell. You will be able to choose the type of sale from a set price, an auction, or a bundled sale.

The NFT industry in India is rapidly growing and has seen an active participation due to the success seen in the western world. CryptoPunks (art images depicting ‘punks’ with randomized attributes such as gender, headgear and eyewear), Bored Ape Yacht Club (series of NFT avatars taking the form of disinterested-looking apes), and Axie Infinity (the biggest NFT video game currently in the market) are a few examples of successful and well-known NFTs in the western world.

Following suit, Bollywood celebrities such as Amitabh Bachchan and Salman Khan and cricketers such as Dinesh Karthik have recently launched their own NFTs. Amitabh Bachchan’s NFT collections of Madhushala (a poem by his late father), autographed posters and collectibles have received bids close to $1 million. BollyCoin is a new NFT that currently involves Salman Khan and might gather interest from other celebrities in the near future. BollyCoin is a concept that has recently come up in the film industry. BollyCoin’s aim is to bridge the emerging crypto market with the Bollywood industry by providing an innovative way to allow the industry and blockchain enthusiasts from around the world to own NFTs of their favourite films and celebrities. Cricketer Dinesh Karthik launched his NFT, the first sports NFT in India, that featured his match winning six against Bangladesh in the 2018 Nidahas Trophy final. This NFT is titled ‘Six for the Win’ and the NFT features an animated clip with Karthik’s voice-over. Since India is a cricket loving nation, launching a cricket NFT will allow fans to get even closer to players and give them a feel of the emotions that factor in a player’s mind. These are just a few examples of how the NFT space in India is gaining a lot of popularity and is only expected to grow in the future.

Despite NFTs having plenty of uses and benefits, they do come with their pitfalls. The most prominent drawback of NFTs involve sustainability. Creating and selling NFTs accounts for a lot of power usage, as do transactions involving blockchain. A growing NFT and crypto market is only going to lead to more harm than good for the environment. Just as with other cryptocurrencies, the threat of NFTs being stolen is always prevalent. In the recent past, NFTs have been the target of a few security breaches. Adding to the threat of NFTs being stolen away, another pitfall concerning security involves the underlying asset being altered, deleted or moved altogether after it is sold as a NFT. This is a serious issue because it represents a misuse of authority. Another potential drawback is that just as with the crypto market in general, the NFT market is also speculative and prone to uncertainty. Last but not the least, ownership does not equal control. This means that just because someone owns an original NFT, it does not mean that they can control its distribution or duplication across platforms. “Ownership in the context of NFTs means that the owner holds the authentic (original) piece but cannot stop prints and duplicates being made”.

All in all, NFTs have been gaining plenty of popularity, especially in India and the space is only expected to grow in the country. As discussed above, NFTs have gained a lot of attraction amongst celebrities and athletes as they allow fans to connect with celebrities and players on a more personal level. They have a plethora of use cases and in this increasingly growing and evolving digital world, they provide a new way to own physical assets in a digital way. In conclusion, NFTs have various use cases and benefits, which, if implemented properly, can provide a future of digitization.

By Arhan Parikh (arhan.parikh@xumitcapital.com)












Xumit Capital

Xumit Capital is a boutique investment advisory firm that deals in equity, global & crypto portfolios and investment migration programs.