While most of us have heard about NFTs and have seen plenty of the Bored Ape Yacht Club’s photographs on our Twitter and Instagram feeds, not many know about the components of an NFT.
Non-fungible tokens can represent anything- be it virtual, physical, or semi-physical- as a digital asset. From digital art pieces to real estate to music, NFTs can be made for almost every range of items possible.
NFTs use blockchain technology, like cryptocurrencies, and are hence considered secure and reliable. To understand more about them, we need to know what makes an NFT.
Know the components of your NFT.
- Digital Collectible.
When it comes to the type of digital asset you can buy, then NFT goes all out. In short, you can buy a digital artwork, a music file, a video or any collectible under digital category.
- Crypto Wallet.
While there are some NFT Marketplaces, like Nifty Gateway, which allows the use of fiat currency for buying an NFT, most NFT Marketplaces only provide transactions via cryptocurrencies.
Hence, to buy, sell or trade an NFT, the first thing that you need is a crypto wallet.
This wallet will connect your account to the NFT Marketplace. like OpenSea, Rarible etc. These wallets follow the blockchain protocols that are the building blocks of an NFT. Their are two keys of a wallet- private and public.
The public key is visible to all, but the private should never be revealed. The public key is used by interested traders to verify the ownership of the purchase and recieve digital assets.
Since most marketplaces accept payments in Ethereum, most ETH wallets will work for NFT transactions (1 ETH is priced around 2,500 dollars but the prices change regularly).
- Cryptographic hash function
A cryptographic hash function is a mathematical algorithm that takes a random size data as an input (like login credentials) and maps it into a fixed size output. This cryptographic value is called “hash” and is considered to be very secure.
The NFTs that you buy, is essentialy a media file which is then converted into a “hash” function using this cryptographic algorithm. Hence, the transaction is taken as the input and converted into an output of a fixes size- that is a unique fingerprint of the file.
SHA-256 is one of the strongest hash functions available. It is complex and hence very difficult to crack or hack.
This cryptographic hash function algorithm is used by NFT buyers to set passwords or login credentials.
A word of caution though, always remember that a cryptographic hash file can never be converted into the original file. In simple terms, if your original file is “abc” then its hash is “ ba7816bf8f01cfea414140de5dae2223b00361a396177a9cb410ff61f20015ad” as per SHA-256 algorithm. This hash file however, cannot be decrypted into “abc”.
- Smart Contract.
Once you connect your crypto wallet to your NFT Marketplace, then all the purchases that you make are done through “smart contract”. It is linked to the address of your cypto wallet and carries out your transactions easily.
The smart contract allows the buyer to directly buy the NFT once all the terms and conditions of the purchase are met. Then, the cryptographic hash, Metadata and the non-fungible token are added to the blockchain using this smart contract.
Ethereum, one of the most common blockchain smart contract platform, uses ERC-721 standard smart contracts for minting NFTs.
With this, we hope that you now know a bit more about the parts of your non-fungible asset!