What are Blockchain and NFTs?
Blockchain is one of the most transparent and trustworthy transaction technologies of today and as such, it plays a fundamental role in the cryptocurrency system. It allows systems, such as Bitcoin, to ensure the security of their transaction environment without the need for third-party intervention. The key aspect of the blockchain is the decentralization, which ensures that all users maintain control over the information, instead of a single authority. Another advantage of this method is that it prevents the alteration of stored information, protecting it from being deleted, lost, or stolen.
The data structure of the blockchain is what makes it unique and differentiates it from a common database structure. The information is gathered in groups, called blocks, with a predefined capacity. Once full capacity is achieved, the block is closed and linked to a new block, creating a chain-like structure. This method of storing data allows the creation of a timeline with a fully traceable history of changes.
blockchain economy basics
The blockchain economy relies on a consensus mechanism that determines the legitimacy of any transaction made within the network. The two biggest mechanisms are Proof-of-Work and Proof-of-Stake, with the former based on mining blocks by solving hard computational problems, while the latter is based on using coins as collateral. In both cases, the validator is rewarded with coins.Due to the blockchain’s decentralized nature, it is possible to observe and track all the transactions made in real time. The traceability of the blocks benefits the security of the blockchain as well since it is possible to trail all the actions in case something was stolen or moved elsewhere.
Blockchain data storing structure storing data allows the creation of timeline that preserves all the modifications that have been done and hence the changes are fully traceable.
Cryptocurrency and Non-Fungible Tokens (NFTs)
Cryptocurrencies are usually based on blockchain technology, using the benefits of the decentralized structure, and secured with cryptography. It is important to note that since cryptocurrency is not issued by any authority, it ensures its immunity to manipulations and possible government interference.
NFTs, on the other hand, unlike cryptocurrencies, are unique tokens that can be described as one-of-a-kind real-world items, such as artworks. They can be used to successfully represent physical assets in the virtual world or represent unique digital items. Non-fungible, as the title suggests, means that these tokens are unique, and cannot be exchanged like other cryptocurrencies. A good analogy is that a cryptocurrency represents something like a dollar bill, which is no different from any other dollar bill in the world, whereas an NFT is a strictly defined item that is completely unique. Due to the decentralized nature of the blockchain that tokens are based on, it makes the transactions and owning NFTs a very secure process, making it almost impossible to be hacked or stolen. This solves some of the most important problems that exist on today’s internet, such as lack of ownership and royalties, making them extremely popular among creators of any kind, collectors, and more and more simple users.
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