What is NFT?
NFT stands for Non-Fungible Token. Non-fungible means something can't be exchanged for an additional item because it's unique. As an example, one piece of art isn't equal to another. Both have unique properties. Fungible items, on the opposite hand, are often exchanged for each other. For instance: one dollar or Bitcoin is usually adequate to another. Okay, but what's an NFT?
NFTs are tokens that survive a blockchain and represent ownership
of unique items. Why is that useful? Well, tracking who owns a digital file is
hard because it are often copied and distributed effortlessly so how are you
able to prove who's the first owner when everyone has a uniform copy of the
file?
NFTs solve this problem. Imagine that you simply made a bit
of digital art, essentially a JPG, on your computer. You’ll create or mint an
NFT out of this. The NFT that represents your art contains a touch of data
about it, like a singular fingerprint of the file, a token name, and a logo.
This token is then stored onto a blockchain, and you, the artist, become the
owner.
Now you'll sell that token by creating a transaction on the blockchain. The blockchain create confident that this information can never be tampered with. It also allows you to trace who's the present owner of a token and for a way much it's been sold within the past it’s important to notice that the artwork itself isn't stored within the NFT or the blockchain. Only its value just like the fingerprint or hash of the file, a token name, and symbol, and optionally a link to a file hosted on IPFS.
Now here's where NFT's become weird. Once you buy an NFT
that represents artwork, you do not get a physical copy of it. Heck, most of
the time, everyone can download a replica for free of charge. The NFT only
represents ownership, which is recorded during a blockchain so nobody can
tamper with it. Some say that NFT's offer you digital bragging rights.
And to form it even weirder: while the token owner owns the first
artwork, the creator of the NFT retains the copyright and therefore the
reproduction rights. So an artist can sell his original artwork as an NFT, but
he can still sell prints. apart from digital art, NFT's also can be wont to
sell concert tickets, domain names, rare in-game items, land , and basically
anything that's unique and wishes proof of ownership.
For example, the founding father of Twitter sold his first
tweet as an NFT. Anyone can see that tweet on his profile, but now, just one
person can own it. Which person paid over 2.9 million dollars for it.
Why are some NFTs worth millions? Well, their worth is
decided by what people are willing to buy it. If I'm willing to pay 100 dollars
for a specific NFT, then it's worth 100 dollars. Prices are driven by demand,
so take care because an upscale NFT becomes worthless if nobody wants to shop
for it. Okay, another thing before we end: how do they work technically?
NFTs are smart contracts that survive a blockchain. During
this case, the contract stores the unique properties of the item and keeps
track of current and former owners. An NFT can even be programmed to offer
royalties to the creator whenever it exchanges hands. So there you've got it!
How Bitcoin Wallet Work Actually?
It looks somewhat like this, counting on the cryptocurrency. It looks like a totally randomly generated string of letters and numbers but actually, there's a touch more happening. The primary thing we'd like to understand is how these are created. Anyone can create a replacement wallet by generating a public and personal key pair with a particular algorithm.
In the case of Bitcoin or Ethereum that's via an elliptical curve digital signature algorithm. That’s quite mouthful, but the deduct here is that the algorithm will spit out a personal key and an associated public key. These keys are mathematically linked to every other.
You can take the private key and derive the general public key from it. But you can't take the general public key and switch into the private one. The general public key will become your wallet’s address, quite like your checking account number. And therefore the private key's your way of proving that you simply are the owner of the wallet and thus that you can spend the cash inside it. So in summary: public keys are often shared with everyone while private keys must be kept to yourself.
Unless you would like people to make a decision what to try
to together with your money. Thus far so good. But this technique features a
few interesting side effects that I would like to say. For starters, everyone
can generate a vast amount of wallets, right their own computers. It’s only
limited by how briskly your computer can generate key pairs. However, nobody
will realize the existence of your wallet until it receives some coins. See, a
cryptocurrency just keeps track of transactions among wallets. It doesn't have
an inventory of all existing wallets. So if your newly created wallet has not
been involved in any transaction, it simply doesn’t exist for the surface
world.
Think of it this way: the blockchain is simply an enormous
spreadsheet with transactions going from one wallet to a different. The
blockchain itself make nothing really care about if these wallets exist or not.
It’s only you would like to spend coins during a wallet that you simply need to
prove that you’re the owner.
And you'll only do this with the private key that's related
to the address of the wallet. Another side effect is that you simply can
transfer coins to a wallet address that doesn’t exist. Again a Blockchain
doesn’t have an inventory of valid addresses, so it cannot check if you’re
transferring coins to a legitimate one. Just in case you transfer coins to an
invalid address then they're just lost unless someone can generate the private
key for that specific address. Which, right now, isn’t really possible due to
how the algorithm works. Fun fact, this is often mentioned as “coin burning”
and it’s sometimes done intentionally by cryptocurrency projects that want to scale
back the entire supply and thus increase the worth of their coin.
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