UNDERSTANDING WHAT NFTs ARE.
Tags: blockchain, nft, beginners
Published: 2023-01-11 16:26:15


Introduction.

NFTs are basically digital asset like images or videos that has uniqueness and special identification codes which can be verified by distributed ledger technology which represents the ownership and the authenticity the associated tangible and intangible assets of the NFT under study. This gives an overview what is NFT? question. NFT growth is powered by blockchain technology hence its important to study what blockchain entails to understand NFTs.

Blockchain technology behind NFTs growth.

Blockchain is a new technology that is evolving fast in the financial market with its popularity rising from the launch of bitcoin cryptocurrency in 2009. Cryptocurrencies are in existence on public database which are maintained by blockchain. The database is distributed the computer network which are running on the blockchain software referred to us smart contracts. There is no single entity that can claim ownership or control of the database, but anyone can access the database, prove identity, and be enabled to access the database to transfer cryptocurrency via private keys that are associated with their private crypto wallet.

The most popular blockchain protocol which is also first of its kind called Ethereum is used to support virtual machines to execute a complete scripting language which are used to run blockchain developments. With the continuous development on the global infrastructure, Ethereum was integrated to Ethereum Request for Comments (ERCs). ERCs were fungible tokens that specificized the interface with metadata that was used in the financial market.

Further integration of fungible tokens led to development of new class of token called non-fungible tokens, where rise was due to market demand to have unique tokens that would enhance safety across business. Fungible tokens were replaceable and couldn’t assure users the safety of the information on the market. In our objective to study what is NFT? its important to explain the fundamentals that NFTs have making them different from fungible tokens.

Fundamentals of NFTs.

a) NFTs are non-fungible hence each unit of the commodity cannot be interchanged to other units of the same commodity. As from other currencies, one bitcoin is equivalent to another bitcoin, however, two NFTs cannot be the same.

b) NFTs are uniquely tied to specific digital files where a media file is converted to non-fungible form through minting process.

c) NFTs were specifically created for ownership purpose hence they allow creators to specifically claim ownership of the token. This is greatly opening the existing opportunities for the digital commerce and engagement market.

As described earlier, NFTs are unique cryptographic non-interchangeable tokens that have metadata issued on a blockchain. To understand what does NFT stand for in details, we will explore the components that result to what are called the non-fungible tokens.

The four components are;

a) Token is the first component which is thought of as verifiable signature which is issued or recorded on blockchain. It has unique details that allows one to view the address minted on the token and reveal the previous owner of the token.

b) Associated metadata, which is the hyperlink to the digital content, forms the latter component which is a section of a computer code that can be able to create an image or a hyperlink to content that is hosted online, a graphic, image, text, or audio recording.

c) Smart contracts are basically a series of automatically executable computer instructions which are associated with a particular NFTs. It’s a set of guidelines that govern how a token can interact with the blockchain.

d) Final component is the promise element which is not a technological issue but rather a contract by the issuer of the NFT which gives value to the token. It’s an important part since it determines the information that owner will have, concerning the NFT that he owns.

Conclusion.

From the blog we have clearly answered the question of what is NFT? as non-interchangeable tokens that have digital content harnessed in blockchain technology. Furthermore, the blog explains each component of the concern what does NFT stand for, hence giving a better understanding of non-fungible tokens. Non-fungible tokens fundamentals instill trust to users since they are unique and cannot be changed. These features have enabled the NFTs to be widely used in fans engagement, generation of revenue and improving customer’s relationship in businesses.