ELI5: What, really, is an NFT?

Well, it’s kind of like money. It’s completely imaginary, yet we never have enough. Except in this case instead of being an artificial stand in for labor effort, it’s a stand in for something infinitely reproducible with virtually no effort at all. And yet the supply is still limited. Almost like the labor or use value aspect isn’t really the point at all. But rather the power posturing/exclusivity value.

What you’re really buying is the ability to be happy about the fact that nobody else can have it. Just like money. (For those who already have too much of it).

So in one regard it’s a cynical way to avoid taxes, on another level it’s a savagely hilarious representation of how our society basically works.

It's like a digital version of Tulipmania.

At the risk of downvotes… and you did say ELI5…

An NFT is a scam. Designed to extract money from gullible and uninformed people’s pockets.

It was designed to be like a digital pass that entitles you as the owner of a digital asset. It could be something as simple as “oh that’s cool let me right click and save image as” or “only someone with this NFT can access this website that leads to a discord server where all the scammers I mean cool kids hang out”

I think most of the answers here have missed the basic point of an NFT, which is this:

In a digital system, there is no limit to copying data. You can copy and paste a file millions of times, share it with others, they can copy it, and so on. There is no scarcity.

An NFT is simply a way of introducing scarcity into this digital system. An NFT cannot be copied like other files, it is an entirely unique file. [1]

This has resulted in some people and artists using NFTs for digital art to add scarcity. Think about how the physical art world works: an individual art object is unique and cannot be copied. There is only one Mona Lisa. All the copies and photographs of it are not equivalent to the original. This is different than say, a manufactured object like a Coke can, an iPhone, or a Ferrari.

But digital art can be copied. By using a NFT, however, you can functionally have a scarce digital art object in the same way that a physical art object is scarce. So if you’re a digital artist, you can use a NFT to sell a piece of digital art as a scarce original.

Of course, the world of people using NFTs is full of scams and people trying to capitalize on trends. And it’s not really clear if a scarce digital object actually has value in the way a scarce physical object does. But at its core, it’s about scarcity.

1. I oversimplified this. Technically you can still copy the file, but it won’t be treated as the “original” or “valid” file by the validation network. Sort of like how you could make a copy of the Mona Lisa down to the atom, but it wouldn’t be considered the original by the art museums, experts, etc. that are the validation system in the art world.

Like NFTs their owners tend to be proud and vocal enthusiasts but the big difference is that RealDoll owners aren’t disposed to explain how they have unlocked massive wealth with their purchase