The Crucial Role Played by Permissionless Technology and Decentralization in the NFT Ecosystem
Blockchain, the technology that allows the generation and sale of cryptocurrencies and non-fungible tokens (NFTs), was first introduced in 2008. Blockchain technology was decentralized by design to ensure security over performance by democratizing security. This means that rather than granting control and decision-making powers to a single entity, these powers are transferred to a distributed network owned by the people.
The result is a secure network with reduced weak points that can cause systematic failures. It makes data reconciliation easier, optimizes the distribution of resources, and creates a trustless environment where no user needs to know or trust other users. At the heart of these decentralized blockchain systems is permissionless technology that allows peer to peer interaction with no middle-man.
Simply put, permissionless technology is technology that allows anyone to anonymously join a blockchain network, store information, and perform transactions via an internet connection. Also known as the public blockchain, permissionless technology has no centralized gatekeepers restricting entry or participation. For NFTs, decentralization ensures security and authenticity in unregulated virtual markets.
It allows users to buy art directly from the artist themselves rather than having to visit an art auction and go through various chains of command before getting their art, and allows the artist to retain 100% of the profit..
If these permissionless systems allow virtually anyone to join anonymously, how can they be as secure as they claim to be?
Permissionless blockchains do this by removing absolute power from the hands of a single entity that could be compromised or corrupted. In permissioned blockchains with gatekeepers, a single entity who controls participation can easily compromise the blockchain’s security if they make inappropriate changes or are compromised.
Whether this entity is a single person, an organization, or a group of people, giving them total control over the system makes it much riskier. On the other hand, decentralized blockchains that rely on permissionless technology ensure security by verifying and permanently recording every transaction on the ledger. This traceability essentially prevents users from making any secret changes to the system as it’s all open to the public to view every transaction or change made on the network.
More than 50% of its users would have to make changes simultaneously for a permissionless blockchain to be disrupted. As such, this permissionless state makes decentralized blockchains much more secure compared to permissioned blockchains where the decision-making power is assigned to a single entity. As an example, Meta — who are a centralized entity looking to expand into the Web3 world — can make changes to their platform on a whim. The alternative is to have no single entity in control, but many users through a network.
With the worldwide NFT industry currently valued at $15.7 billion, experts believe that the nascent sector will be worth $122.43 billion by 2028. In such a future, NFTs could even be used to cover a variety of everyday transactions. A decentralized network that runs on permissionless technology will be core to ensuring the NFT ecosystem remains safe and secure as NFT adoption increases.
On top of providing security to the NFT ecosystem and allowing users to interact directly with artists, creators, businesses, and consumers, a more decentralized blockchain can help address common problems such as network failures, data breaches, and performance issues by ensuring users have access to a streamlined network.
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