An Intro to Blockchain and NFTs
What is a Blockchain?
A blockchain is a distributed software network that functions both as a digital ledger and a mechanism enabling the secure transfer of assets without an intermediary. Just as the internet is a technology that facilitates the digital flow of information, blockchain is a technology that facilitates the digital exchange of units of value. Anything from currencies to land titles to votes can be tokenized, stored, and exchanged on a blockchain network.
The first manifestation of blockchain technology emerged in 2009 with the Bitcoin blockchain, a secure, censorship-resistant, peer to peer electronic cash system. Because Bitcoin is accessible to anyone, it is an example of an open, or a permissionless blockchain.
Today, there are many forms of blockchain technology. Some blockchains have been designed to meet the needs of a finite group of participants, where access to the network is restricted. These are examples of private, or permissioned blockchains.
In addition to the secure transfer of value, blockchain technology provides a permanent forensic record of transactions and a single version of the truth – a network state that is fully transparent and displayed in real time for the benefit of all participants.
Regardless of the type of blockchain protocol that is deployed, blockchain technology holds great promise to transform centuries-old business models, paving the way for higher levels of legitimacy in government and creating new opportunities for prosperity for everyday citizens.
What is a Non-Fungible Token?
When Saturday Night Live does a skit on non-fungible tokens, we know the concept has gone mainstream. SNL captured many people’s reaction to NFTs—one of confusion, incredulity, and eye rolling. But NFTs are here to stay, and they’ll serve an increasingly important role in our digital economy. So what are they and where do they fit in the blockchain ecosystem?
Remember, a blockchain is a piece of software that functions as a ledger distributed across nodes of a communications network. What distinguishes it from other online databases or trading platforms is its immutability: we can trade digital assets peer to peer, and no one can alter or undo those transactions without a majority of the network’s approval. That’s a big plus over the Internet.
At one end of the spectrum of digital assets are cryptocurrencies like bitcoin used in payment networks such as the Bitcoin blockchain. Bitcoins are fungible: that is, one bitcoin is equal in value and function to every other bitcoin. So if you have a contract involving bitcoin, you could replace one bitcoin with another bitcoin without breaking the terms of your agreement.
At the other end of the spectrum are NFTs: each token represents a thing of singular value. In a contract, you couldn’t replace an Andrew Wyeth painting with Mike Winkelmann art and expect no one to notice. NFTs span a range of unique assets—not just collectibles but birth and death certificates, deeds to property, and the identities of objects on the Internet of Things.
While the bubble around CryptoKitties—the original NFT phenom—may have deflated, the buzz around the auction of Beeple’s work revealed the potential of NFTs. It is an area of value creation limited only by your imagination, your technical ability to create it, and the marketing, accounting, and legal support to carry it out.
Want more information? This guide, written by our research contributor Alan Majer, unpacks the concept of the non-fungible token with examples and covers what every professional and enterprise leader needs to know about this area of value creation.Read More