A blockchain is a distributed database that allows for secure, transparent, and tamper-proof recording of transactions. This decentralized ledger enables each participant, called nodes, to store a copy of the entire platform.
The blockchain is the underlying technology behind top cryptocurrencies like Bitcoin, Polkadot, BNB Chain, Ethereum, and many other applications.
A blockchain consists of a chain of blocks, each of which contains a set of transaction data. Every time a new transaction is added to a block, participants plugged into the network automatically update their copy of the ledger. This setup ensures that everyone has an up-to-date record of all details stored in the network.
The data in each block is encrypted and linked to the data in the previous block, forming a chain. This setup makes it impossible to modify or delete them without changing all subsequent blocks in the chain, which requires the approval of other network users.
Blockchain transparency comes from the fact that all transactions are publicly visible on the ledger. However, the identity of the parties involved in a transaction is kept secure (anonymous or pseudonymous) through encryption.
The tamper-proof nature of a blockchain is only possible because of cryptographic hashes. A hash is a mathematical function that takes input data of any size and produces an output of a fixed size. The output of a hash function is unique to the input data, meaning that even a small change in the input will result in a completely different output.
When data is added to a blockchain, it is hashed using a cryptographic hash function like SHA 256 used by Bitcoin. The hash function’s output is then added to the next block in the chain. Accordingly, it is impossible to modify the data in a blockchain without changing the hash of every subsequent block, which would require the network’s consensus.
What Is The Role Of Blockchains In NFTs?
Blockchains are the underlying technology that enables the creation and exchange of non-fungible tokens (NFTs). They play a vital role in the world of NFTs. Without these base layers, NFTs would not be possible. NFTs are unique digital assets that cannot be replaced or exchanged for another, no matter how identical to the eye they may appear. This contrasts with fungible tokens such as ETH or BTC, which are interchangeable and replaceable. Because it is impossible to swap NFTs for another, these assets are valuable and desirable to collectors and investors.
When an NFT is minted, it is assigned a unique identifier on the blockchain. This identifier can be used to track the NFT’s ownership and provenance. In essence, blockchains provide a decentralized and secure way to record and track ownership of NFTs.
The underlying network also enables and anchors smart contracts, which can be used to automate the exchange of NFTs. For example, a smart contract could be used to automatically transfer ownership of an NFT when it is sold. Automating transaction processing on a transparent network is critical because it lets NFT owners actively monitor their assets. At the same time, they can trade them quickly and without worry.