Blockchain and NFTs: Definition, Work, Types, and Key Features

Blockchain and NFTs: You’ve probably heard of blockchain, NFTs, and cryptocurrency by this point. These terms are getting more and more prevalent, so it’s possible that you even have a basic idea of what they mean. But now, you get to move from a fuzzy understanding to a firm understanding of these ideas.

We’re going to define these phrases so you can blow everyone away with your blockchain expertise the next time you’re at a dinner party. So, shall we begin there? What is blockchain, exactly? Is it really as revolutionary as some claim?

Imagine a blockchain as a form of shared database that consists of a collection of blocks that are used to store transaction records. As suggested by the name, these blocks are chained together. They serve as a record of transactions. Additionally, the technology guarantees that transactions are precise, unchangeable, and transparent (we’ll go over each of these features in more detail later).

Consider Bitcoin, the most well-known cryptocurrency. The exchange of bitcoins results in transactions that are recorded on chains of blocks, or blockchains. The blockchain technology that underpins Bitcoin and other cryptocurrencies is what makes these exchanges and records possible. Cryptocurrencies do not use blockchain technology. The underlying technology of cryptography is the technology. Blockchain and cryptocurrency cannot be used interchangeably. More than only cryptocurrency can be done using blockchain technology.

4 Different Types of Blockchain Exist

1. Open Source, Public

This is the kind of blockchain that is most frequently discussed. For instance, the blockchain, a public, open-source ledger, is the foundation of Bitcoin. The public can see the ledger, but participant identities are kept private.

2. Exclusive

A private blockchain is a closed ledger that is accessible only to a select group of people, such as employees of an organisation. For private companies looking to use the technology internally, private blockchains could be a viable solution.

3. Collective

Federated blockchains are another name for them. Both public and private blockchain technology are present in them. Despite not being accessible to the general public, they still share some traits with public, open-source blockchains.

4. Hybrid

A hybrid blockchain is exactly what its name implies: it combines public and private blockchains, but unlike consortium blockchains, hybrids lack complete transparency and offer no rewards for participating in validation.

Key Features of Open Source, Public Blockchain Technology

The analogy of banking to blockchain is the simplest method to explain why this technology is so revolutionary. Banking provides the ideal framework for understanding blockchain technology because the majority of people are familiar with how bank exchanges operate.

Consider banking without bank fees and wait times. Since blockchain is decentralised, there is no middleman. There is no central authority, such as a bank, that controls transactions and sets time limits and banking fees. Blockchains run on a peer-to-peer network rather than a single central server and governing body. a distributed node network (stakeholders and their devices). These nodes keep the records’ consensus current.

Dispersed Trust We refer to the same transactional regulation stated earlier as a trust system. In the way that it does. When you conduct business through the banking system, the parties engaged in the transaction—including the bank and its employees—are referred to as “trust agents.”

On the other hand, when a transaction takes place on the blockchain, faith is placed in the underlying technology and validation procedure.

There is no way to alter the records. Immutability is the name for this quality. Banking transactions can be changed or reversed after they’ve been completed. Transactions on the blockchain are different from this. The following blocks are constructed to provide a record that cannot be altered once a transaction has been verified and recorded on the chain. This validation procedure lessens fraud and errors.

Transparency. Data on the blockchain is unchangeable, and transactions are visible to other network users.

In summary, a blockchain-based asset transfer between a buyer and a seller is quick, secure, and direct.

What are NFTs?

As was already mentioned, blockchain technology enables the exchange of different kinds of assets. Assets can be converted into fungible or non-fungible tokens on blockchains.

Exchangeable tokens are fungible. You can trade one for another. Consider conventional money. It is possible to swap one peso for another. No peso is more distinctive than the next. They both hold the same amount of worth. Non-fungible tokens (NFTs) on the other hand are exclusive and cannot be traded for one another. Consider a Picasso piece. Picasso and Van Gogh cannot be traded for one another. They don’t quite have the same worth.

NFTs serve as confirmation of ownership and validity for various assets. They stand for possession of something priceless. Consider the purchase of an NFT digital artwork as an illustration. The token serves as a representation of who owns the digital artwork. There is a change of ownership when that token is sold or given away.

On NFT marketplaces, assets including artwork, music, game tokens, real estate, and more are traded. The benefits of blockchain technology, including as immutability, decentralisation, transparency, and permissionless access and trade, are also enjoyed by NFTs because they are based on it.

The adoption of blockchain technology is still a way off. However, what we’ve already seen shows how NFTs and blockchain technology can have an impact on and disrupt a variety of businesses. With the use of this technology, the way we transact business, trade money, and store and transfer ownership of goods can all be fundamentally altered. Nobody can predict how events will play out perfectly. However, what is certain is that there will be significant changes in the future.