📑TECH
Last updated
Last updated
Blockchain consists of a series of "blocks." The term "block" refers to a data storage unit within blockchain code. Each block contains a unique identifier from the previous block, forming a "chain" of blocks.
Blockchain Principles
The first block created on a specific blockchain is called the genesis block. This first block can be thought of as the first line in a database, consisting of only a small set of data. However, it includes a unique numeric identifier, such as "0001." When a second block is added, it is identified as the "0002" block and includes information that it follows the "0001" block. This is how the chain is formed.
Blockchain Protocol
This refers to the various types of blockchain platforms that can be used to develop individual applications. Each blockchain protocol adapts the core principles of blockchain to suit a specific industry or application.
Blockchain Decentralization
Unlike conventional databases stored on a single server, blockchain is decentralized and distributed across a P2P network. Each node in the network (usually a device or server) holds a copy of the blockchain. Before adding a new block, most network nodes must verify and validate it. This helps limit the ability of unknown individuals to tamper with the chain’s integrity or omit critical information (e.g., adding a block not properly connected to the previous block). For instance, the blockchain for Bitcoin, the most famous cryptocurrency, is known to have over 13,000 nodes. This is what people mean when they describe cryptocurrency and blockchain as decentralized.
Thanks to this blockchain economy and the way blocks are coded, once information is added, it becomes very difficult to remove it from the chain.
Advantages of Blockchain
1. Data Integrity
Due to the decentralized network system, there is no single person with the authority to manipulate the data. Therefore, it is difficult to tamper with data stored on the blockchain. Once information is added to the chain, it can be reviewed even years later with confidence in its integrity and accuracy.
2. Greater Transparency
Most blockchains are highly transparent, allowing external observers to view data stored on the chain. This is particularly important in cryptocurrency. Tracking the flow of funds through a blockchain wallet is much easier than through a personal bank account. This transparency helps identify and trace fraudulent actors more easily.
3. Decentralized Control
Blockchain technology is based on the concept of decentralization, processing users' data and funds without relying on large organizations like banks or credit card companies. The P2P ledger system prevents any individual or organization from exerting excessive control over the blockchain.
Disadvantages of Blockchain
1. Lack of Regulation
Due to limited regulation, it is much harder to recover lost data stored on a blockchain. If cryptocurrency in a blockchain wallet is accessed by someone else, there is no bank or central authority to help recover the currency. This is one of the main reasons many people remain skeptical of cryptocurrency and its underlying technology.
2. Excessive Transparency
Transparency can also be a downside. Since most blockchain data is accessible to most people, it is not ideal for storing sensitive information. While hashing conceals the identity of data owners, the data itself remains visible. Thus, caution should be exercised regarding proposals to use blockchain for government records or medical data storage.
Despite these challenges, blockchain technology is already in use in many areas.
Key Technical Concepts of NFTs
Blockchain-Based
NFTs are issued on blockchain networks such as Ethereum. Blockchain is a technology where data is recorded and stored in a decentralized manner. NFTs record metadata on the blockchain, including ownership and transaction history, allowing for clear proof of asset ownership. NFTs are issued through standards like Ethereum's ERC-721 and ERC-1155, which define protocols for handling non-fungible assets.
Non-Fungibility
A core characteristic of NFTs is their non-fungibility. Unlike interchangeable assets like Bitcoin or the dollar, where individual units are identical in value, each NFT is a unique digital asset that cannot be exchanged for another NFT of equal value. This uniqueness enables the distinctiveness of digital art, in-game items, collectibles, etc., allowing owners to verify the exclusivity of their NFTs.
Proof of Ownership
NFTs represent proof of ownership over a digital file rather than the file itself. Thus, buying an NFT is akin to purchasing ownership of the original file or a particular digital asset. This allows artists and creators to issue their work as digital assets and track ownership on the blockchain. Buyers can verify the authenticity of the asset, and ownership is always verifiable on the blockchain.
Scarcity and Permanence
NFTs typically exhibit scarcity, as issuers can decide the number of copies of a particular NFT. Although multiple copies may exist, each NFT has unique metadata, distinguishing it as a separate asset. Additionally, since NFTs are recorded permanently on the blockchain, they cannot be destroyed or lost, and ownership and transaction history cannot be altered.
Smart Contracts
NFTs are traded through smart contracts on the blockchain. Smart contracts are pieces of code that execute automatically when certain conditions are met, simplifying and automating NFT transactions and ownership transfers. For example, a digital artist selling an NFT can set up a royalty structure through a smart contract to automatically receive a percentage of sales revenue, ensuring continued earnings each time the work is resold.
Advantages of NFTs
1. Transparency:Blockchain technology ensures that NFT transaction history and ownership aretransparently available.
2. Decentralization:Assets can be issued and traded freely without central authority involvement.
3. Ownership Guarantee:NFTs provide clear proof of ownership for digital assets, and owners are assured of their asset’s uniqueness.
4. Royalties:Creators can receive royalties through smart contracts for each resale of their work.
Disadvantages of NFTs
1. Market Volatility:Since the NFT market is still emerging, asset values can fluctuate drastically.
2. Legal Uncertainty:The legal framework regarding NFT ownership is not fully established.
3. Environmental Concerns:Some blockchains (e.g., Ethereum) operate in an energy-intensive way, meaning NFT issuance and transactions can negatively impact the environment.
