NFTs are here, and they’re the future of cryptocurrency. NFTs will empower users to build unique, creative solutions to both practical and conceptual problems. NFT‘s can be used as a tool for social interactions, the downfall of blockchain-based assets like Bitcoin, and digital scarcity which is a key factor in launching any market economy.
As the years go on and we become increasingly accustomed to online currencies and tokens, the popularity of BNFT’s has grown. Truth be told, without the concept of cryptocurrencies, it would have been quite hard for NFT’s to gain the popularity they have today. NFT transactions in 2020, according to NonFungible.com, have skyrocketed, reaching $250 million. This is three times the amount of transactions recorded in the previous year.
(Image Source: Fusible)
What is an NFT?
NFTs are not another cryptocurrency or token, they’re a brand new way to store and exchange data. NFTs hold information within protocols that are designed to make their use both secure and social. Data is represented as tokens that can then be exchanged between users with complete privacy and authenticity guaranteed. This means that whenever someone wants to exchange data they do so with complete transparency and privacy.
NFTs have the potential to be the only usable storage mechanism for information in society as we know it today, purely because of their design and inherent properties. NFTs aren’t a tool for speculation, they’re a tool for creation.
Why are NFTs needed?
Information is the most important aspect of our lives today. It’s what allows us to make decisions and allows us to understand the world around us. In a world where information can be bought, sold, manipulated, and traded with no transparency behind it, we need something new. Sure, cryptocurrencies like Bitcoin and Ethereum do a fine job for now at making transactions private from governments or banks. They aren’t truly private though and can be tracked by anyone “ both in real life or through blockchain analysis.
NFTs, because of their design, are truly private and can be used in the same way that we use information today. We need NFTs to be the storage mechanism for all of our data. From information about the world around us to how we feel about a certain topic, it needs to live on a blockchain. NFT’s have a huge place in the art world, keeping creations exclusive and online to live on.
(Image Source: Coindesk)
How do NFTs work?
NFT’s use what’s called a Merkle Patricia Tree (Merkle Tree) which is an abstract data structure that allows any block of data to be broken up into parts, each part containing hash pointers that point toward other parts until the bottom of the tree is reached. This makes it simple to find (or lookup) where any part of any data is on the tree.
This makes it possible to both find where the hash pointers are, and also how many hashes there are in that particular part of the tree. For example, when looking up a block of information on an NFT, you have two options:
You can read it from beginning to end. Read all of the hashes from top to bottom until you reach the bottom hash. Then if that hash is larger than a certain threshold, you know that data has at least been stored in this NFT once.
Key pieces of information are stored beginning to end as opposed to being spread across different locations on the tree. You can start from the bottom and find specific hash pointers that lead you to where you want to go. Just look up each hash pointer and see where it leads you.
Each block is a Merkle Patricia Tree which allows for data to be broken up into parts and each part contains a hash pointer towards a larger part known as the root of the tree.
NFTs use this technique in order for anyone, anywhere, with any device, or at any time, to be able to look up data about anything and know how much has been changed since its last recorded version. Merkle trees are a powerful tool for allowing users to always know how much information they have and also how much information they can trust. NFTs and art are the next big thing after crypto and blockchain.
