NFTs Aren't Just Expensive JPEGs: Unpacking the Tech Behind Them So You Don't Get Pranked!

Non-Fungible Tokens (NFTs) have become a cultural and financial phenomenon, but behind the hype of the digital art market, there is an elegant technical architecture that solves a fundamental problem in the digital world: how to prove ownership and scarcity of assets that are inherently easy to copy? The answer lies in a combination of blockchain technology, smart contracts, and decentralized file systems.

Understanding these technical components is crucial to looking beyond the hype and assessing the long-term potential of NFTs as an infrastructure primitive for digital ownership. This article will dissect the tech stack that makes NFTs work.

Foundation Layer: The Blockchain
The foundation of any NFT is the blockchain, a distributed, immutable, and transparent digital ledger. Most NFTs today are built on the Ethereum blockchain, although other platforms like Solana, Polygon, and Tezos are also gaining popularity.

The blockchain provides a crucial function: permanently recording who owns what NFT and the complete history of all its transactions. Because of its decentralized nature—run by thousands of computers around the world—no single entity can unilaterally change or delete this record. This provides a level of security and trust that does not require intermediaries such as banks or government institutions.

Why is this important? The blockchain is the single source of truth for NFT ownership. Without a blockchain, an NFT is just an entry in a centralized database that can be manipulated by the owner of the database.

Logic Layer: Smart Contracts and Token Standards
Above the blockchain is the logic layer run by smart contracts. Smart contracts are computer programs that run automatically on the blockchain. For NFTs, these smart contracts define the rules, functions, and metadata of an NFT collection.

To ensure interoperability—the ability for NFTs from different projects to interact with each other and be traded on the same marketplace—the Ethereum community developed token standards. The most common standards for NFTs are:

• ERC-721: This is the original standard for NFTs. Each token under this standard is unique and indivisible. This standard tracks a unique token ID and associates it with the wallet address of the owner. This is the standard used by iconic projects like CryptoPunks (although pre-standard) and Bored Ape Yacht Club.
• ERC-1155: A newer and more flexible standard developed by Enjin. This standard allows a single smart contract to manage multiple types of tokens, both fungible (such as in-game currency) and non-fungible (such as unique sword items). This is much more efficient for gaming applications and projects that require different types of assets.

Smart contracts for an NFT typically contain core functions such as:

• mint(): To create a new token.
• transferFrom(): To transfer token ownership from one address to another.
• ownerOf(): To check who owns a token with a specific ID.
• tokenURI(): A crucial function that we will discuss next.

Metadata Layer: Where is the “Art” Actually Stored?
This is one of the most misunderstood aspects of NFTs. Storing large files such as high-quality images or videos directly on the Ethereum blockchain would be very expensive because every byte of data requires a computing cost (gas fee). Therefore, most NFTs do not store their visual assets on-chain.

Instead, NFT smart contracts use the tokenURI function. This function, when called, will return a URL that points to a JSON metadata file. It is this JSON file that contains all the information about the NFT, including:

• Name and Description: The name of the NFT (e.g., “Bored Ape #1234”) and its description.
• Attributes (Traits): The unique characteristics of the NFT (e.g., background color, hat type, facial expression).
• Link to Visual Asset: And most importantly, a link within the image field that points to the actual image, video, or audio file.

This is where an important decentralization consideration comes into play. Where does this link point?

• Centralized Server (Bad Location): Some early projects store their assets on regular web servers (e.g., AWS). This is a weak point. If the company goes bankrupt or the server goes down, the link will break, and your NFT will point to nothingness.
• IPFS (InterPlanetary File System – Good Location): The preferred solution in the Web3 world is IPFS. IPFS is a peer-to-peer and distributed file storage network. Files are identified not by their location (like a URL), but by their content (using cryptographic hash). This means that as long as at least one node on the IPFS network stores the file, the file will remain accessible and cannot be changed without changing its hash, which would break the link from the NFT. This ensures data persistence and resilience.

Why is this important? The metadata storage architecture determines the level of permanence and true decentralization of an NFT. NFTs whose assets are stored on IPFS are fundamentally stronger and more in line with the decentralization ethos than those stored on centralized servers.

Conclusion: A Tech Stack for Ownership
So, when you buy an NFT, you are actually buying a token recorded on the blockchain, governed by a smart contract, which contains a link to a metadata file which is (hopefully) stored on a decentralized file system, which in turn contains a link to the actual visual asset. The combination of these layers creates a robust system for establishing, transferring, and verifying ownership of unique digital assets. Understanding this architecture is key to separating NFT projects built for the long term from projects that are merely transient.