An Anatomy of an NFT Art collection in Tezos — Chapter 1: The Basics Around Blockchain, Crypto Wallets, Tezos and NFTs
I’ll try to keep this chapter as brief as possible, hopefully without falling into the mistake of forgetting anything important. So, let’s go right into it.
What the freak are Blockchains?
Simply put It’s a network of computers (technically a P2P network) in which the members of the network have the duty to guarantee that only legitimate transactions are performed and, after that, make sure that everyone on the network knows about it, keeping every single transaction stored on a so-called public ledger (keep this name in mind) — all of this using cryptography, which is why there’s always a crypto-currency associated to a Blockchain. This whole blockchain stuff is huge, currently, more than 10,000 crypto-currencies are existing on Blockchains, according to an article by Investopedia updated in January 2022.
Anyways, regardless of how each blockchain operates (we will get more details into it soon) all of them work in a decentralized way, which means that virtually anyone can not only execute transactions anonymously but also run his node. Once someone runs a node she receives a fee for being part of the gang — hopefully, the fee is good enough so she keeps running the node, and the blockchain stays alive.
How transactions are made?
Good question, sir. Everyone in a blockchain network is represented by a hash, a series of numbers and letters randomly put together — this hash is called a Wallet. A wallet can do two things: send transactions and receive transactions, like any other bank account you ever had.
All wallets are protected by a crazy password built upon a sequence of words, called a mnemonic (do not attempt to say this word three times in the bathroom).
Once you have your Wallet set you will usually buy some crypto in an Exchange — Binance, Kraken, Coinbase, Bittrex, etc… all with regular money. It works pretty much as buying normal stuff that you buy every day, except that it’s a crypto and you probably will never put that physically in your pocket. So, you commit to it, bought a couple of cryptos, and then sent them over to your wallet… and now, you’re ready to spend it! Or, you could hold it, expecting that it somehow becomes popular and as any other financial asset, gains value over time.
_ But Hei, which ones are the coolest currencies to buy, tho?
_ Honestly? I have a couple of thoughts on that. Tezos I like a lot and that’s why I’ll talk about it. Right here, right now!
The author: The Tezos blockchain is cool and I can prove it!
Anyways, to keep it as simple as possible, you need to know that two are the most famous “reward mechanisms” behind blockchains. They are the Proof-of-Work (PoW) and the Proof-of-Stake (PoS). The difference is how each chain processes the transactions and how it rewards the members.
PoW chains (as Bitcoin and Ethereum) rely on computation power to execute heavy mathematician algorithms on a node, to address a block for it to process. Practically, It means that the stronger the computation capabilities of a node the higher the odds of it receiving a transaction and being rewarded for that as an outcome — this rewarding mechanism is called Mining, by the way.
PoS, like Tezos, are way more efficient as they DO NOT rely on computation power, rather the nodes eligible for processing needs to figuratively put their skins in the game, handling a high amount of coins in the hands of the chain, in such a way that if he fails to process the transaction (or accept an invalid one) he will immediately receive a penalty, in the form of some coins deducted from his stakes — PoS chains calls this process Baking.
As a result, once the participants of the baking process do not need to spend thousands on mining infrastructure the overall cost of the chain is so lower at the current state that there’s close to no fee (usually lower than 0.01xtz).
There’s way more to add to Tezos to make my case for that but I’ll reduce that to another crucial point which is this cool thing called Smart Contracts, also present in Ethereum and other PoWs but made straightforward on Tezos — also, as I said, fees are currently so low that running those contracts on-chain is practically free.
That’s basically why Tezos has become the go-to chain for a lot of NFT artists and collectors. But, yeah… I said the word NFT and now you demand an explanation about what it is. So, as you wish.
No one gets NFTs but everyone has an opinion on it. You are different, my friend.
Well.. here we are, my man. We walked our way through the puzzling roads of blockchain concepts just to find ourselves in another maze with a sign that wrote: “NFTs for Sale”.
I’m certain that you already heard about NFTs, since pretty much every major news outlet already gave their view about it (as your favorite digital influencer also did) and I won’t fight that, rather I’ll be just a bit technical, to help you get a real sense of it.
NFTs are, in a nutshell, just data representations, just an identifier, present in a Smart Contract in an immutable way and associated with a wallet. Not sure if I made your life any easier here, but it is what it is. Think of NFTs as a Certificate that you store publicly on the web (on the chain, in this case). This Certificate says: Wallet XYZ owns 1. Yes… 1, a number, an integer >= 0, if you prefer. This 1 has metadata associated with it and It’s precisely where most of the confusions regarding NFTs arise.
Usually, people wrongly associate NFTs with some piece of an image and even more erratically think that the NFT is the image — in such a way that by deleting the image the NFT is over. That ain’t even close to being right and that’s because I decided to be more technical here. NFTs are IDs associated with Wallets, and that’s pretty much it. So, NFTs are IDs. Keep that in mind as we advance in the next chapter It will make more sense.
Nonetheless, It’s impossible to say that the NFTs aren’t related to any kind of digital asset at all, and that’s why the metadata exists. The metadata tells what the NFT represents (stay calm, you will understand). For instance: an Ape that was poorly drawn wearing a hat of really bad taste. The attributes, as the cloths of the Ape, or even the drawing itself, are part of the metadata of the token and not the token itself. Again, the drawing IS NOT the NFT. Or, at least, it is not the proof of ownership of the token.
But if NFTs are just IDs and metadata associated with Wallets what the hell can we do with that? I would say that possibilities are near endless. Think about the number of times you had to prove ownership of something to be able to do anything. To enter a club, join a game, have a rare piece of art, a unique car, all of those are top-of-mind effortless examples of what public provable ownership could be made possible.
It all might sound deeply confusing at first but as you see some examples it starts to tinkle. Hopefully, in the next chapters, we will build our own NFT collection and the fog in your brain will dissipate, just stick with me.
So, to summarize everything we just saw:
- Blockchains are like public ledgers, where every transaction is stored and made public;
- To operate on a blockchain you need a Wallet — which is just a hash protected by a randomly generated password;
- Two are the most popular types of chains: those that use proof-of-work (PoW) and those that use proof-of-stake (PoS); PoS is way more efficient as it does not rely on computational power to prioritize who will process the transaction.
- Tezos is a cool blockchain technology that uses PoS, allow for Smart Contracts, and has really low fees; Thus, It has been used widely by NFT creators and collectors;
- NFTs are just data representation and the ownership is provable by associating an ID with a Wallet address, regardless of what the metadata says about the digital asset; Virtually anything could be an NFT, once it respects the smart contract immutability constraint.