How NFTs and Blockchain are Interconnected?
Each day, tons of new technological innovations and products hit the market. Most, if not all, of these, are created with the intention of elevating and improving our daily lives. One such innovation that has excited tech enthusiasts, finance aficionados, artists, and aesthetes altogether are NFTs. According to Google Trends, a data exploration tool that tracks popular combinations searched on Google, more and more people are looking up “NFTs” on the search engine. In fact, it has recently surpassed the first time global searches for the ever-popular term “crypto”. If you’re not sure what NFTs and Blockchain are, you’re in luck! Here, let’s quickly discuss what NFTs are, as well as talk about how it’s connected to cryptocurrency and blockchain.
What are NFTs?
NFT stands for non-fungible token. While this may seem like a jumble of words for the uninitiated, those who understand basic tech and finance terms will recognize that NFTs are non-interchangeable representations of an asset. NFTs link ownership to various unique digital or physical items, such as music, photos, works of art, videos, and even real estate.
Think of NFTs as modern-day collectibles — these can be bought and sold on the internet and signify your ownership of a given item. NFTs cannot be changed, tampered with, or altered because each token has distinctive properties and is valued differently from similar tokens. This particular trait of NFTs is also helping empower artists and creators today. An article from Data Driven Investor explains that NFT technology makes digital assets investible as it replicates certain traits that have so far been exclusive to products in the physical world, such as proof of ownership, uniqueness, and scarcity. Through NFTs, creators can sell and own their digital work, gain fair and proper compensation from their hard work, and safeguard their art.
What is the Connection Between NFTs, Blockchain, and Cryptocurrency?
NFTs would never be possible without blockchain technology. Essentially, NFTs are stored on a blockchain digital ledger, a series of data blocks that are linked together. These ledgers are stored in different servers across the globe and can be seen, as well as verified, by anyone who has access to the network. The distributed and peer-to-peer property of blockchain ledgers makes it impossible for anyone to tamper and falsify the data. In addition, one can record activity and information securely as it leverages cryptographic algorithms. In short, blockchain technology allows NFTs to be immune to change and theft.
NFTs are closely tied to another blockchain product: cryptocurrency. However, it’s vital that we establish the difference between NFTs and cryptocurrencies. While both are powered and made possible by blockchain technology, cryptocurrencies are fungible. This means that you can exchange one unit of crypto for another unit. Unlike cryptocurrencies, NFTs are not fungible, meaning it cannot be replaced and is only tied to one specific digital asset.
Most NFTs are sold on the Ethereum blockchain and are purchased using Ether, which is the native currency on the network. NFTs were birthed thanks to smart contracts, a feature exclusive to the Ethereum blockchain. In essence, smart contracts are pieces of software code that permit the network to keep information in an immutable and transparent manner. These handle the transferability and verification of NFTs. A post about cryptocurrency trends on Daydreaming in Paradise notes that Ethereum was the second most popular coin in the market in 2020. And with NFTs, Ethereum may soon overtake the leading crypto platform, Bitcoin.
NFTs have the potential impact on today’s technology, culture, and economy. And with huge companies like Meta and Adobe dabbling into NFTs, we’ll soon find uses for it in various aspects of our life.
Written by Jessie Breene for the exclusive use of OpenDefi