Functional value of NFT

 1. NFT function: realize the decentralized certification and transaction of assets

From the perspective of authentication: the core reason is due to the immutability and permanence of authentication, and the basis for realizing the immutable attribute is the disclosure of data transaction process and distributed storage based on blockchain technology.

From a transaction point of view: In addition to being non-tamperable and publicly traceable, it is also due to cost factors, because NFT corresponds to assets, and there are intermediary costs for centralized institutions as intermediate trust agencies, while NFT is based on the blockchain, and the blockchain itself It is a trust-based machine that eliminates intermediate costs.

2. NFT value = virtual currency + asset warrant + liquidity

As a non-homogeneous token minted on the blockchain, NFT is mainly traded through virtual currency, so NFT has a certain virtual currency value.

As a digital warrant of an asset, NFT represents the value of the asset itself. At the same time, the technical characteristics of NFT endow asset ownership with liquidity and traceability. On the one hand, liquidity increases asset value. On the other hand, traceability solves the problem of asset identification such as art collections. Pain points of fake and real rights.The liquidity of NFT endows the transaction value of asset increment.

3. NFT underlying technology

The underlying technology based on NFT — blockchain . The only public, non-tamperable, and tradable attributes of NFT are based on the current blockchain technology.

The data structure of the blockchain is divided into a block header and a block body. Different blocks are connected through the hash value of the previous block header to form a chain structure. The block header and the block body are connected through the Merkle root field. connected. Taking Ethereum as an example, NFT Development Company the data stored in the block header mainly includes the hash value of the parent block header, the hash value of the root node of the Merkle tree related to the current block transaction, the block difficulty value, the miner address, the block height, the Gas Upper limit, Gas usage, timestamp, Nonce value, etc. The data stored in the block body includes transaction record table and uncle block, where the NFT transaction record is stored in the data record table of the block body and packaged by miners.

A simple diagram of the blockchain structure is as follows:

The data confirmed and packaged into blocks on the blockchain cannot be tampered with and will be permanently stored on the chain. After the data information of NFT is confirmed on the chain, it can no longer be modified. When the miners or super nodes use the consensus algorithm to complete the block generation, they will broadcast to the entire network through the P2P protocol (P2P protocol is a distributed network protocol, which appeared earlier than the blockchain technology). , the information will be updated. This mechanism realizes decentralized distributed records, and the consensus algorithm ensures that malicious nodes cannot tamper with information.

1. Blockchain classification

According to the degree of decentralization, it can be divided into three types of chains, namely public chains, alliance chains and private chains.

2. Consensus algorithm

The basis for blockchain to establish decentralized trust is the consensus algorithm . The current mainstream public chain consensus algorithms are divided into three categories, namely PoW, PoS, and DPoS:

PoW algorithm: Bitcoin and Ethereum 1.0 adopt the PoW algorithm, that is, Proof of Work. Taking Bitcoin as an example, continuously perform SHA256 calculations, and finally find out that the node with a hash value that satisfies a given number of leading 0s has the right to produce blocks;

PoS algorithm: Ethereum 2.0 adopts this algorithm, Proof Of Stake, proof of rights and interests, and introduces the concept of coin age. The more coins you hold, the higher the probability of getting a block. This algorithm reduces the amount of calculation and improves TPS (concurrent transactions per second) volume), sacrificing a certain degree of decentralization;

DPoS algorithm: Delegated Proof of Stake, each node mortgages the tokens in its hands to vote for the most capable and reputable node to produce a block, taking the EOS blockchain as an example, the entire network votes to select 21 super nodes, 21 super nodes Nodes take turns to produce blocks. This algorithm can greatly increase TPS, but the degree of decentralization is further reduced

3. Smart contract

Standard protocol: NFT is deployed on the blockchain through standard contracts such as smart contracts ERC-721 and ERC-1155 . A smart contract is a piece of executable code deployed on the blockchain. The ERC-721 standard is applicable to any non-homogeneous digital content. ERC-1155 is more used in games to identify a class of props.

Smart contract transaction trigger and execution mechanism: transaction is a bridge connecting the external world and the internal state of Ethereum, so Ethereum is also called the state machine of the transaction. After the smart contract deployment of NFT is completed, the RPC interface is called externally to access the main network of Ethereum. The miners package the transaction, and the EVM (Ethereum Virtual Machine) finds the corresponding smart contract and executes the corresponding contract function according to the external input parameters. After the execution is completed, the status is updated on the chain.

Example: The Boring Ape NFT developer deploys the smart contract code to Ethereum, and the NFT Development Services platform OpenSea collects and displays it. When one of the users initiates the purchase operation of this Boring Ape NFT on the OpenSea platform, OpenSea calls the RPC interface to access the Ethereum mainnet to send the transaction Request, the miners package the transaction to find the smart contract to execute, and update the status on the chain to complete the transaction.