Hash Notes

What is Blockchain? & What is Non-Fungible Token (NFT)?

Blockchain:

· Distributed database shared among a computer network. Electronically stores information.

· Secure and decentralized record of transactions

· Guarantees fidelity & Security without central party

· "Block" refers to data (Transaction, Ledger, Smart Contract) and storage is in consecutive groups known as "blocks". If you send ETH to someone else, the transaction data needs to be added to a block to be successful. Per block we can fit appox. 1500 transactions.

· Blocks hold information, once filled, a block is closed and linked to prior blocks through chains, creating blockchains.

· Creates redundancy but also security – if someone tries to alter one record, the others would not agree and prevent change.

· Decentralization and private keys = transparency & anonymity

· Hashing (Password) = encryption

· SHA-256 (Secure Hashing Algorithm) - 256 (1s and 0s) and computers transform them to letters & numbers beyond just 1s and 0s.

NFT

· “Non-fungible” means unique and can’t be replaced with something else.

· Secured on a public blockchain, cannot be divided, not interchangeable.

· Multiple editions of the same item can be minted, but each edition is numbered and therefore unique

i. Scarcity can be verified on the blockchain

· Can be anything that is digital

i. Art, Music, Video, Etc

· On the contrary, bitcoin is fungible. One bitcoin is the same as another.

· Most NFTs on Ethereum. Original standard ERC-721.

· Allows artists to sell work to new previously unavailable markets.

· Guarantees ownership, easily transferrable, fraud proof.

· Minting = creating the NFT. Must confirm the asset on the blockchain, and record transactions including owner’s account balance containing the said asset.

Analogies to help us understand

· Owning NFT does not necessarily provide full rights. Artist can still retain the copyright and reproduction rights.

· Analogy: Anyone can buy a print of the Mona Lisa. But only one person/entity can own the original.

· Blockchain is like a series of glass boxes in a Bank vault with content everyone can see, verify and can’t change. Everyone knows where the boxes are and what they contain. To open a box, you need a private key.

· Blockchain is like a Google sheet. You and everyone else who the documents have been shared with can access the file. Think of the data limit of a block as the row and column limit in a google sheet / excel file. When one sheet fills up, it goes to the next one which is linked, for example through formulas that reference cells. Everyone with access can view it, make comments or suggest changes, and the revision history is visible to all. What’s seen and entered cannot be denied by anyone, and one person can’t make a change without everyone seeing the change.

Apppplication of Blockchain and NFTs

· Blockchain can store any digital assets, such as crypto transactions, NFT, legal contracts, or product inventories. They can be used to vote securely in elections.

· Food safety – use a blockchain to track a product’s route from origin, each stop, and delivery in the event of contamination, save time and lives.

· A smart contract is a computer code that can be built into the blockchain to facilitate, verify, or negotiate a contract agreement. Smart contracts operate under a set of conditions to which users agree. When those conditions are met, the terms of the agreement are automatically carried out. They cannot be reversed once created.

· Louis Vuitton Moët Hennessy (LVMH) as well as Prada Group and Compagnie Financière Richemont created the Aura Blockchain Consortium, a nonprofit group that will promote the use of a single blockchain solution open to all luxury brands worldwide. Unique ID for each product, record of every transaction, authenticity certificate, care (maintenance, repair) records, development of algorithm to detect counterfeits.

· Health/HR departments to secure sensitive data

· All NFTs on Ethereum can communicate such as to confirm ownership - Gaming industry can transfer in-game features to other games, even if the original goes bankrupt, as well as sell them for currency

· Loans, insurance, and investments with DeFi (decentralized finance)

· Ticket Sales, verifying ownership and authenticity, determining market price