- Alba Ranis
Blockchain technology, cryptocurrencies and nfts – What is it and how did it all start?
Blockchain technology has brought with it a new world of possibilities, but where did it come from? First of all, we must understand that Blockchain and Bitcoin are different things.
Blockchain is a technology that consists of a network of computers (or nodes) distributed around the world, each of them possessing an exact copy of all transactions made, for this reason we say that it is transparent and unforgeable, also the data is encrypted, which offers more security.
Bitcoin is a blockchain with its own cryptocurrency and its main function, although it is better known as a financial asset with which it is speculated, is that of a digital means of payment to acquire products and services. Bitcoin is created thanks to a mathematical process called “mining”, in which miners lend their computers to solve complex calculations and in exchange receive Bitcoins, but its creation is limited and is set at 21 million (to date about 19 million have been mined), and every 4 years there is a “halving” that reduces by half the bitcoins mined per year.
What is the difference between Token, Cryptocurrency and NFTs?
To clarify concepts, we can start by saying that cryptocurrencies are a type of token, and NFTs, another, but there are more.
BTC or ETH are currency tokens, because they have their own blockchain (Bitcoin and Ethereum respectively), they share the characteristics of money, which are to be fungible, divisible, portable and with a limited supply, and their main function is as a decentralized means of payment. They can also be sent, received or mined.
On the other hand, there are the NFTs, Non Fungible Tokens, each of them unique and not interchangeable for any other. NFTs are traded in marketplaces such as OpenSea or MagicEden and are paid in cryptocurrencies such as ethereum in the first case or solana in the second.
To get them you will need a Wallet to store both the cryptocurrencies to make the payment, and then the NFTs themselves, and the best known are MetaMask or Phantom.
Utility tokens & governance
As we have seen in the previous section, the term token covers more than it seems, and there are more types of tokens, such as for example governance tokens and utility tokens
Utility tokens are used for projects that want to obtain funding, so they are given in exchange for FIAT money to invest in the project, and in return the buyer receives tokens that in the future he expects to be revalued obtaining a higher reward.
Governance tokens allow their holders to have a voice in making decisions about the protocol, allowing them to vote on, for example, the development of new products or features, partnerships, budget distribution, among many others.
Chronology of blockchain technology
How do NFTs and their applications work?
NFTs (Non Fungible Tokens) are unique digital assets that represent real-world objects; each one has its own certificate to guarantee its originality and exclusivity, and therein lies much of its value.
When we think of NFTs, Bored Ape or CryptoPunk come to mind, but there are also NFTs in music, avatars, fashion designs and even tweets.
The applications of NFTs are infinite and depend on the creativity of their creators; and although they are mostly known for their speculative value, they are much more, and more and more utilities are appearing, such as ticketing (you can read the article we dedicated to them), or token rewards in exchange, which allow either to get more NFTs or exchange them for FIAT money recovering part of the investment, or in other cases to obtain a wide variety of privileges such as access to presales, or VIP products or services.
Possibilities offered by blockchain technology
Blockchain technology is getting better and better every day, achieving more acceptance and providing tailored solutions to both the most modern and traditional sectors, and here we share some of them with you.
- Cost reduction
- Increased efficiency through supply chain optimization
- Increased security, transparency and assurance Reduction of paper and storage space, as well as improved data management
- Detection and fight against fraud (data, drugs, certificates, food …)
- Smart Contracts aim to eliminate intermediaries, time and bureaucracy thanks to these “scripts” or computer codes that automatically execute and enforce themselves. With Smart Contracts we can simplify processes that are now costly in time and resources for example in the field of insurance, when buying or selling a vehicle, or a house.
As a general review we can conclude that Blockchain is a type of decentralized technology that provides security and transparency, and allows us to reduce costs, fight fraud and simplify bureaucratic processes that are currently inefficient. Bitcoin and Ethereum are Blockchains that have their own cryptocurrency and their main purpose is as a means of digital payment.
There are several and very diverse types of tokens, but the .most common are Cryptocurrencies, Utility tokens, Governance tokens and NFTs. NFTs are traded in marketplaces and their profits depend on the creativity of their creators, but their growth is increasing.