Since this innovative technology is partly responsible for bringing NFTs to life, it’s worth exploring its main characteristics to better understand how non-fungible tokens work and why they hold so much potential.
What Is Blockchain Technology?First and foremost, a blockchain is a record-keeping technology. It’s a digital ledger of transactions that is shared among the nodes of a computer network and helps maintain a secure and decentralized record.
What sets blockchain technology apart from other traditional databases is that data is structured in an innovative way: a blockchain collects and holds sets of information in groups known as “blocks,” which have a specific storage capacity. When filled, a block is closed and linked to the previous block, thus forming a chain of data —you guessed it: the blockchain.
One critical aspect of blockchain is that it guarantees the authenticity and security of data and promotes trust between the parties to a transaction without the need for an intermediary. That means that people could exchange funds without a bank. Musicians could sell their art without a record label. Artists could offer their work without agents.
The Key Characteristics of BlockchainBlockchain technology has a series of characteristics that make it unique and quite promising. Let’s take a look:
- Immutability. Once it’s recorded on the blockchain, data can’t be changed or altered. Each block on the chain has a “hash value” (an alphanumeric string) for itself and the previous block, meaning that blocks are securely coupled and cannot be tampered with.
- Decentralized. Blockchain technology is considered decentralized because it doesn’t have any governing authority or a single person looking after it. Instead, a group of nodes maintains and validates the network.
- Distributed. All network participants hold a copy of the ledger to ensure complete transparency, and the distributed computational power across the computers ensures a better outcome.
- Secure. To add another layer of security, all information recorded on the blockchain is encrypted, meaning that each piece of data has a unique identity on the network.
- Consensus. Before anyone can record a transaction on a blockchain, all relevant parties must agree that the transaction is valid. This decision-making process is known as “consensus” and prevents inaccurate or potentially fraudulent transactions from being recorded on the ledger.
Blockchain: The Technology Powering NFTsNFTs are blockchain-based tokens. This means that the process of minting or creating an NFT involves recording its data on a blockchain.
Since NFTs are powered by blockchain, they inherently have all the benefits of this technology. They cannot be replicated or altered once they are recorded, and their metadata remains safely stored on the chain for anyone to see.
That’s one of the main reasons why NFTs hold so much promise.
While we’re still in the early days of the evolution of blockchain, it’s interesting to think about the potential for innovation and change this technology can bring.