NFT
Decentralization wonder
What do you think is the cost of the above image?
Many of you may think that’s a puzzling question to ask. Well, to answer your question this is one of the designs of the famous Lazy Lion collection and it is worth 1.76 ether which amounts to 4,691.26 USD dollars.
But what is the cost of a pixel cluster? Why is it worth anything at all, to begin with? Many people are perplexed by the explosion of NFTs and their associated marketplaces. However, while NFTs may command ridiculously high prices, there is a logic to how and when they generate value. However, in the middle of a rush of new projects, it can be difficult to identify which ones are adding value and which are simply riding the wave of publicity.
You might be wondering: what is an NFT, anyhow? WHAT DOES NFT STAND FOR?
Non-fungible tokens.
To understand these Non-fungible tokens firstly we will need to get familiar with the concepts of blockchain.
What is a Blockchain?
The idea of blockchain was first conceived in 1991. It was reintroduced with an improvised design and enhanced features in 2008 by Nakamoto Satoshi.
As the name suggests blockchain is a group or chain of blocks that contain information or data. A block contains 3 components that are data, hash, and hash of the previous block.
The data stored in the block depends on the type of transaction made. For example, if we talk about the bitcoin it stores details about the transaction made such as the sender, receiver, and amount.
The hash of a block can be compared to iris scanning. It is the identity of a block and all its contents and therefore is always unique the same way as the iris scanning. The hash is a one-way function: it cannot be used to obtain the original data but only to check that the data generated by the hash matches the original data. Once a block is created, the hash is also being created. Changing something inside a block will cause the hash to change. Hence hashes are very useful to keep a track of changes made in the blockchain. If the iris scan changes it is no longer the same person, similarly if the hash of a block changes it is no longer the same block.
The third component of a block is the hash of the previous block. This component makes the blockchain secure. Block number 3 points to block number 2, block number 2 points to block number 1, and so on with the help of the hash of the previous block. Let’s say we play around with the second block, this causes the hash of the block to change as well. This will make the third and the following blocks invalid since they no longer store the valid hash of the previous block.
Now, one can tamper with a block and recalculate hashes of the other blocks. So to alleviate this we have something called the ‘Proof of Work’. It slows down the creation of new blocks. This mechanism makes it difficult to tamper with the blocks and if one does tamper with a block, they will need to recalculate the proof-of-work for all the following blocks.
So one of the reasons blockchain is secure is due to the use of hashing and proof-of-work.
Discarding the centralized system for the management of information, blockchain uses a peer-2-peer (P2P) network. When a person or an organization joins this network, they get a full copy of the blockchain. The nodes, which is a system comparable to a server, can use this to verify if everything is still in order.
What happens when someone creates a new block?
If someone creates a new block then this new block is sent to every person/organization in the network. Each node verifies the block to make sure it hasn’t been tampered with. If everything is in order, each node adds this block to its blockchain.
Hereby all the nodes in a given network create a consensus. They agree on which blocks are valid and which aren’t. Blocks that are tampered with will be rejected by other nodes in the network. So to successfully tamper with a block in a blockchain one would need to tamper with all blocks on the blockchain, redo the proof-of-work for each block and take control of more than 50% of the peer-to-peer network.
Thus blockchain is a system of storing data or information which makes it difficult or impossible to change, hack or evade.
Another feature of the blockchain is Smart Contracts. Smart Contracts give assurance and a sense of trust among parties without the involvement of any intermediary party. Smart Contracts are executed by following simple ‘if-then’ statements. A network of computers executes certain actions when some predefined conditions are met or fulfilled. These actions vary from releasing funds, issuing tickets, etc to appropriate parties. The blockchain is updated when the transactions are complete which means that transactions cannot be changed and only a given network of individuals/organizations can view the results or transactions taking place.
Examples of blockchain: Bitcoin and Ethereum are also very popular examples of blockchain. But in this article, we will discuss NFTs which are held on Ethereum Blockchain.
Now coming onto NFT(s)
They have grabbed a massive amount of spotlight in the past year. People have managed to sell anything and everything at a glorified rate. NFTs stands for Non-Fungible Token. Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. NFTs emanate just the opposite.
NFTs use blockchain technology to incontestably verify who has the original digital product and they are a unique token of ownership that has value. So when people buy and sell NFTs what they do is buy and sell their virtual ownership over something.
Who can earn from NFTs? Literally anyone and everyone.
Designers, musicians, and many more artists can earn using NFTs. Their fans have got a new way to support them. Artists can use smart contracts to further increase their earnings. For example, whenever their piece of work is bought or sold they will get a certain cut.
Anyone can make money off of NFTs since NFTs can be traded. Each NFT has a market value. The NFT market is viewed as a fairly accessible place to invest since it is not like the stock market which is intimidating for a lot of people and the housing market which needs a big investment just to get started.
People get pleasure or satisfaction by knowing that they own something rare, they then form a community that brings forth a sense of belonging in this online and digitally driven space. For example, the famous Lazy Lion NFTs have a very strong community with Roadmaps centered around giving back to the community and an active Discord presence. An NFT Roadmap is a document that maps the goals and strategies of the NFT project.
Via NFTs people can become sole owners of tokens for a digital piece that is authenticated by a fraud-proof system that is the Blockchain.
But what does it really mean to own an NFT?!
Having an NFT does not mean that you have the rights over that digital piece. It can be described as just sharing/ having that digital piece in your head or your virtual space. You just make yourself a part of the history of the product.
NFTs are also created by opportunistic business individuals who view them as another source of making money. Some NFTs are mass-produced using some lines of code to generate them. So they are not some artist’s genuine creation.
Are NFTs here to stay or just a dying trend?
While they do provide some sense of belongingness to a certain section of people which is its major public appeal along with the copious amount of security provided, experts say that NFTs will garner a much larger audience in the coming years NFTs do possess a danger to the environment since NFT trading models consume considerable energy which results in carbon emissions.
If people stop buying NFTs, leave them in the dust, stop creating and trading them, the NFT market could shrink. However, due to its rising popularity, it is unlikely that NFTs will die out any time soon and the possibilities of what can be done with NFTs seem endless
