NFT technology

Cryptocurrencies that have their own, independent blockchain, such as Bitcoin with the Bitcoin blockchain or Ether with the Ethereum blockchain, are referred to as coins.

Tokens are cryptocurrencies that do not have their own blockchain but are based on another existing blockchain, such as Tether, which exists on the Ethereum blockchain.

Each individual block of the blockchain contains three elements:

• Firstly: Data
• Secondly: a hash, the hash function has a non-reversible encryption function which, once broken, cannot be reassembled.
• Thirdly: each block contains the hash of the previous block. Before a new block can be added to the existing chain, the miners check whether the transactions, i.e. the data within the block, are correct. To do this, a suitable random number must be determined. This number is called a nonce. The miners try out many different combinations until a suitable number is found. This is extremely time-consuming and requires a lot of energy. Once the right number has been found, this block is attached to the chain.

The blockchain is nothing more than a large database to which further data blocks are appended chronologically after they have been checked and confirmed. There are two different methods for this release protocol:

Method 1: Proof of work

1. in the mining process, the miner tries to find a result with certain properties as quickly as possible by solving the calculation task.
2. the basis for this are transactions that are summarized in a block.
3. the miner checks whether this transaction is correct by checking the block (hashing). The miner uses the hash function, i.e. a mathematical function that generates a fixed-length character string from a character string of undefined length. The difficulty here is to find a result with certain properties that result from the so-called hash function.
4. The first miner to find the solution receives the block and corresponding rewards (transaction fees). The validated transactions are attached to the blockchain in the form of the new block.

Method 2: Proof of Stake

No mining is necessary here. In this variant, only one person is selected, the validator, who validates the new block. The prerequisite for being selected as the validator is that there are tokens in the wallet. The more tokens there are in the wallet, the more likely it is to be drawn.
When the validator has found the solution, they receive a predetermined transaction fee.

The big advantage of Proof of Stake is that this method requires less energy than the Proof of Work method, as only one person tries to find the solution and not an infinite number of people at the same time. In addition, people or institutions do not have an advantage here just because they can provide a lot of computing power. The algorithm also penalizes participants who try to introduce manipulated transactions into the blockchain.

Based on the unique hash value in each block and the data it contains, each block can be uniquely identified in the blockchain. This means that ownership - whether physical or digital - can be linked to an NFT and assigned to a specific person.