Learn about the technologies and concepts on which SSI is based.
Understanding NFTs from a technological perspective requires the understanding of a few core concepts:
Registries, typically blockchains, which serve as a shared and trusted record of information. They serve as a “layer of trust” and a “single source of truth”.
Cryptographic keys, which convey control over NFTs and enable other crucial functionality such as authentication.
Token IDs, which are used to distinguish NFTs on a blockchain such that each token ID is linked to a unique address (establishing a public key infrastructure) and to metadata. This way different parties can easily find and interact with each other as well as benefit from blockchains’ unique properties like immutability.
Metadata, which can be anything like a piece of digital art or a digital representation of a physical asset. Importantly, metadata can be stored on-chain or off-chain.
Smart contracts, which can be thought of as the programs or apps that run on a blockchain and are responsible for minting NFTs.
Wallets, which are used to store keys or potentially even metadata. Also, they enable the management and sharing of NFTs via easy-to-use applications.
Illustration of main technical concepts related to NFTs:
One can think of these core concepts as different building blocks that are available in different variations and can be put together in different ways. For example:
Different blockchains (or other distributed ledger technologies) can be used to establish Registries (e.g. Ethereum, Polygon, Solana, Avalanche, Polkadot, Tezos, IOTA). Similarly, NFT metadata can be stored in different ways such as on blockchains, other distributed data storage protocols (e.g. IPFS, filecoin) or even traditional databases. Similarly, different smart contract development standards with different strengths and weaknesses can be used (e.g. ERC-721 or ERC-1155 for EVM compatible chains like Ethereum).
As a result, there are many different “flavors” of NFTs depending on which variations of which building blocks have been used and how they have been put together.
Learn what SSI is.
In a nutshell, NFTs are non-fungible tokens which digitally represent ownership of something.
Following this definition each NFT shares at least three properties:
NFTs are “non-fungible” which means that each NFT (or token) is unique in a sense that there is no other thing just like it. In other words, each NFT is one of a kind just like there is only one painting that is the real Mona Lisa. (A fungible token, on the other hand, is not unique. It would not make any difference if a fungible token would be exchanged for another token of the same kind such as a Bitcoin.)
NFTs represent ownership which implies that an NFTs is treated as the actual thing that it stands for so that by selling an NFT you are also selling “the real thing” that it represents.
NFTs can be used to tokenize and represent anything from physical things (like a house) to natively digital assets (like a crypto punk) to ideas and intellectual property.
To understand how NFTs work, one must consider two perspectives:
The functional perspective which is about understanding the implications of NFTs for its adopters and the market, particularly what NFTs enable one to do (that could not be done without NFTs).
The technical perspective, which is about understanding the technologies on which NFTs are built and their properties which give rise to NFT’s functionality in the first place.
NFTs allow us to have digital representations of potentially anything in a way that these representations are unique, trustworthy (or at least a tamper proof record of ownership) and can be traded. We can distinguish the following roles or functionalities:
Issuers - Parties who create (“mint”) NFTs and issue (“drop”) them to someone else (“Holders”). Issuers are the original sources of an NFT. For example, artists who mint their creations as NFTs and transfers them to buyers.
Holders - Individuals or organizations who receive NFTs from someone else (but not necessarily from the original “Issuer”, considering that NFTs are transferable).
Verifiers - Parties who verify NFT ownership and metadata in order to provide access to information, services, products or other benefits, such as is the case with tickets, vouchers or other forms of memberships more generally.
Illustration of functional roles in NFT ecosystems
Learn about Non-Fungible Tokens (NFTs).
Welcome to our introduction to Non-Fungible Tokens (NFTs) for developers and technical readers.
Before you get started, feel free to explore other (less technical) resources that will help you and your team to get a more holistic understanding of NFTs and digital assets in general: