Blockchain NFT technology: Analysis of knowledge related to NFT technology

Hello everyone, today I will introduce to you the underlying protocol, public chain deployment, application scenarios, trading platform and investment methods of the recently popular blockchain NFT technology.

Blockchain NFT technology: Analysis of knowledge related to NFT technology

Underlying protocol

NFT is the abbreviation of Non-Fungible Tokens, which means non-fungible tokens, also known as non-fungible tokens. Just like works of art, each piece is unique. Based on the technical advantages of decentralization, anti-tampering, and time stamping of blockchain technology, by benchmarking the value of off-chain items with NFTs, the ownership of artworks can be confirmed and transactions can be queried. At this stage, NFT mainly has three underlying protocol standards, namely ERC721, ERC1155 and ERC998. There are differences between the three underlying protocol standards.

ERC721 is the first NFT underlying protocol standard and the most commonly used token form in the current NFT ecosystem. It was created and released by Dieter Shirley, CTO of CryptoKitties. Dieter Shirley is one of the founders of NFT. He participated in mining investment activities at the beginning of Bitcoin and later became the chief architect of Flow, a public chain in the NFT field.

ERC1155 standard has the characteristics of semi-fungible token. The difference from ERC721 is: ID is no longer an item, but a category, based on Sending smart contracts in one category can simultaneously realize the transfer of a large number of multi-category assets, significantly improve the transfer speed, and can also meet flexible applications in different scenarios. Compared with ERC-20 and other standards, what stands out about the ERC-1155 token protocol standard is that it can achieve cross-chain compatibility.

ERC998 means Composable NFTs (CNFT for short). This protocol standard can contain multiple tokens in the form of ERC721 and ERC20. Using this protocol standard to generate tokens can package all different types of tokens in one transfer.

The functions of the three underlying protocol standards of NFT are a gradual upgrade process. From ERC721 to ERC1155, token transfer transactions can be realized more conveniently and at low cost; from ERC1155 to ERC998, it can be realized Token packaging transactions and multi-scenario applications. But currently ERC721 is still the most commonly used token form in NFT ecological scenarios.

Deploy public chain

Ethereum is the earliest NFT underlying main chain. It has a well-known limitation – network congestion. In late 2017, the Ethereum blockchain experienced massive network congestion that brought CryptoKitties to a standstill. Therefore, Dapper Labs decided to develop a new blockchain – Flow.

Flow can achieve large-scale scalability without sharding technology and provide high-speed and low-cost transactions. Flow is based on a unique multi-role architecture that delivers massive improvements in speed and throughput while retaining a developer-friendly, ACID-compliant environment.

On the other hand, Ethereum is also developing its own layer2 expansion technology. Polygon is the aggregator of Ethereum layer2 (such as Optimistic Rollups, zkRollups and Validium, etc.), and anything built on Polygon Applications can choose any of these scaling solutions based on the level of security their application requires. NFT projects deployed on Polygon include Aavegotchi, Neon District, Decentral Games, Battle Racers, Doki Doki, and more.

Application scenarios

One ​​of the main application scenarios of NFT is games. NFT based on blockchain technology can record the player’s status and achievements in the game, and save a list of items obtained in the game, such as weapons, power supplies, vehicles, characters, etc. The CryptoKitties mentioned above are the most typical example.

Another big use for NFT is art. Artists can own the copyright to their works of art, and buyers can ensure that the art they purchase is authentic. Such as SuperRare, Nifty Gateway, Rarible, etc. Here we focus on the innovation of NFT in the field of music. NFTs are initially static, but we have seen their gradual evolution from still images to motion graphics and audio. Audio NFTs are technically no different from other NFTs except for the file format, but they primarily achieve a multi-dimensional presentation by fusing audio clips with underlying images or videos.

Another use case for NFTs is the creation of virtual worlds. Decentralized virtual reality platforms such as Decentraland and The Sandbox provide users with a metaverse. Decentraland is a 3D virtual world, a decentralized VR platform based on Ethereum. Users can fully control the content environment and applications they create. The territory in the game is permanently owned by the community, and players can fully control their creations and virtual assets.

Currently, identity fraud or bill forgery is a big problem that needs to be solved. NFT’s blockchain technology allows notes to be independently verified and authenticated, eliminating cheating methods, and tokenized sports competitions are a perfect use case for NFTs. For example, NFT Top Shot, F1 Delta Time, etc.

Thanks to the booming development of DeFi, financial products can also be tokenized in the form of NFTs. Tokenized insurance policies serve as unique NFTs that can be transferred, bought and sold, and in some cases, yielded. Compared with the mountains of red tape in traditional insurance, now users only need to fill in the crypto asset items and amounts required to be protected to obtain a policy, which is greatly improved efficiency. For example, yInsure, iearnfinance, etc.

Trading platform

OpenSea, founded in 2018, is a global digital item buying and selling market based on blockchain. OpenSea is positioned as the industry’s leading decentralized exchange, providing peer-to-peer Ethereum NFT transactions. The platform can trade both NFT tokens and NFT assets.

Nifty Gateway is a regulated money market where users can purchase NFTs with a credit card and sell them directly into a bank account. Recently, Nifty Gateway has also updated the Prepaid ETH function, hoping that Ethereum users and credit card users will be in an environment with the same interaction speed.

MakersPlace was released in 2016 and focuses on casting corresponding NFTs for real-life artworks. Each digital asset acquired by collectors is a unique asset signed and issued by the creator. Even if someone else copies the digital work, what they get will not be an authentic or original signed version. The platform connects artists with art lovers and collectors through a marketplace and partner network.

Rarible, as mentioned earlier, is a platform for creating and selling digital collections based on the blockchain. Users can create and display their own art, or use Ethereum tokens to purchase art for their collection. Buyers and sellers can transact at negligible cost on the Rarible marketplace.

SuperRare was founded in 2017 and follows the ERC721 standard. The entire history and origin of the artwork can be traced on the distributed ledger. No one can cheat and counterfeit it. Once sold, it can be Resell at any price on various NFT trading platforms.

VIV3 was just released this year and is the first comprehensive market on the Flow public chain, aiming to realize the beginning of the transformation from physical ownership to digital ownership.

Investment Method

There are three main ways to invest in NFT, purchase NFT tokens, purchase NFT assets or participate in liquidity mining. If you purchase NFT concept tokens directly, you can purchase leading NFT tokens such as ENJIN, MANA, SAND, etc. on major exchanges. If you want to participate in the NFT collectibles market, general NFT marketplaces like OpenSea provide access to purchase a variety of NFT assets. Additionally, there are platforms dedicated to crypto-art NFTs, such as SuperRare and Nifty Gateway.

Liquidity mining, an application that combines DeFi + NFT with high returns but high risks and instability, has recently surged in popularity. Most liquidity mining protocols now reward liquidity providers with governance tokens, which are often tradable on centralized exchanges like Binance and decentralized exchanges like Uniswap. There are many NFT projects that are combined with liquidity mining, such as Aavegotchi. On Aavegotchi, users can obtain little ghost images by staking atoken, and each little ghost is an NFT token. What’s special about Aavegotchi is that the collateral atoken behind the little ghost is an interest-bearing token that grows in value over time.

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