Photo: Wallrich AM
We live in an age where investing in cryptocurrency is slowly becoming mainstream and new trends are appearing regularly with the potential to become the next big buzz in the crypto world. The technology behind non-fungible tokens (NFTs) is quickly emerging as an attractive tool for new investment methods. Be it magazines, celebrities or reputable companies, NFTs are on everyone’s lips. But what is behind the three letters? Are icons just an illusion? Or does the idea have a future and the possibility of changing the Internet dramatically in this era?
To understand what NFTs are and how they work, we must first look at blockchain technology. In general, a blockchain is a type of database consisting of blocks that are intertwined together like pearls on a chain. On the one hand, each block contains the actual data stored in it, and on the other hand, it contains a unique hash value that ensures that the content of the data is not altered. In addition to its hash value, each block in the chain knows the hash value of the previous block.
In this way, the blockchain authenticates itself in some kind of chain reaction, so if the hash is changed somewhere in the chain, the chain will break. Thus, the data in the blockchain is more secure from tampering than in regular databases. So called NFTs benefit from this aspect.
In the context of the blockchain, the term token is closely related to use as an asset. However, a token can also represent an asset, an economic good, or be the digital equivalent of a real good.
With regard to cryptocurrency, all tokens are exchangeable, that is, exchangeable. This means that each symbol represents the same origin. It doesn’t matter which token you have. It has the same value as any other bearer token. This is how our money works. It does not matter which specific ten euro banknote is used. You can also use two five euro coins, five euro coins, or any combination. The means, in this case the means of payment, are interchangeable.
This is not the case with NFTs. Irreplaceable, i.e. not replaceable, tokens represent a very specific origin and are therefore unique. They only have the storage technology on the blockchain shared with the coin tokens.
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