Try Quests to earn cryptoOptimism part 2
What is NFT?
NFT means non-fungible tokens (NFTs), which are generally created using the same type of programming used for cryptocurrencies. In simple terms these cryptographic assets are based on blockchain technology. They cannot be exchanged or traded equivalently like other cryptographic assets.
Like Bitcoin or Ethereum. The term NFT clearly represents it can neither be replaced nor interchanged because it has unique properties. Physical currency and cryptocurrency are fungible, which means that they can be traded or exchanged for one another.
- NFT stands for a non-fungible token, which means it can neither be replaced nor interchanged because it has unique properties.
Key Features of NFT -
- Digital Asset - NFT is a digital asset that represents Internet collectibles like art, music, and games with an authentic certificate created by blockchain technology that underlies Cryptocurrency.
- Unique - It cannot be forged or otherwise manipulated.
- Exchange - NFT exchanges take place with cryptocurrencies such as Bitcoin on specialist sites.
Read more: Best Cryptocurrencies for Long-term Investment in 2022
Cryptopunks is a notable example of an NFT. It enables you to buy, sell and store 10,000 collectibles with proof-of-ownership.
How Does NFT Work?
Now that you've taken your initial steps in understanding what an NFT is, you should continue on and learn about how an NFT works.
- The majority of NFTs reside on the Ethereum cryptocurrency's blockchain, a distributed public ledger that records transactions.
- NFTs are individual tokens with valuable information stored in them.
- Because they hold a value primarily set by the market and demand, they can be bought and sold just like other physical types of art.
- NFTs' unique data makes it easy to verify and validate their ownership and the transfer of tokens between owners.
Examples of NFT
The NFT world is relatively new to people. Here are some examples of NFTs that exist today:
- A Digital Collectible
- Domain Names
- Games
- Essays
- Sneakers in fashion line
What is NFT Used For?
People interested in Crypto-trading and people who like to collect artwork often use NFTs. Other than that, it has some other uses too like:
- Digital Content - The most significant use of NFTs today is in digital content. Content creators see their profits enhanced by NFTs, as they power a creator economy where creators have the ownership of their content over to the platforms they use to publicize it.
What Are Blockchain Bridges and How Do They Work?
A blockchain bridge is a tool that lets you port assets from one blockchain to another, solving one of the main pain points within blockchains – a lack of interoperability.
Since blockchain assets are often not compatible with one another, bridges create synthetic derivatives that represent an asset from another blockchain.
If you use a bridge to send one Solana coin to an Ethereum wallet, that wallet will receive a token that has been “wrapped” by the bridge – converted to a token based on the target blockchain. In this case, the Ethereum wallet would receive a "bridge" version of Solana that has been converted to an ERC-20 token – the generic token standard for fungible tokens on the Ethereum blockchain.
While bridges open up new markets and work toward a brighter multi-chain future, they come with their own security challenges, as proven by a huge $326 million exploit on the nascent Wormhole bridge in February 2022.
Types of blockchain bridges
Some bridges, known as unidirectional or one-way bridges, allow you to port assets only to the target blockchain and not the other way around. For instance, Wrapped Bitcoin allows you to send bitcoin to the Ethereum blockchain – to convert BTC to an ERC-20 stablecoin – but it doesn’t let you send ether to the Bitcoin blockchain.
Other bridges like Wormhole and Multichain are bidirectional, or two-way, meaning you can freely convert assets to and from blockchains. Just as you can send Solana to Ethereum’s blockchain, you can send ether to Solana.
Bridges are either custodial (also known as centralized or trusted) or noncustodial (decentralized or trustless). The difference explains who controls the tokens that are used to create the bridged assets. All wrapped bitcoin (WBTC) is held in custody by BitGo, making it a centralized bridge. Conversely, bridged assets on Wormhole are held by the protocol, meaning it is more decentralized.
While hardline advocates of decentralization might venture that the custodial nature of WBTC makes it less secure than decentralized alternatives, bridges that decentralize custody over bridged assets aren't necessarily safer, as shown by the Wormhole bridge exploit.
Why use a blockchain bridge?
Porting assets from one blockchain to another blockchain comes with a myriad of benefits. First, the blockchain onto which you port assets might be cheaper and faster than its native blockchain. This is certainly true for Ethereum, where high transaction fees and slow throughput make it difficult for newcomers to get involved in decentralized finance (DeFi).
If investors ported assets to a layer 2 network – a faster blockchain that sits atop the Ethereum blockchain, like Arbitrum or Polygon – they could trade ERC-20 tokens for a fraction of the cost without sacrificing exposure to Ethereum tokens.
Other investors might use bridges to make the most of markets that exist only on another blockchain. For instance, the DeFi protocol Orca is available only on Solana, but supports a wrapped version of ETH.
Bridges are becoming easier to use. Many DeFi protocols have integrated bridges to let their users swap tokens from different protocols without having to leave the platform. This makes the process of converting tokens through bridges less cumbersome.
What are the biggest blockchain bridges?
According to DeFi Llama, there was $21.8 billion worth of crypto locked in bridges as of March 2022. The largest blockchain bridge is Wrapped Bitcoin, accounting for almost half of the bridge market, with $10.2 billion in total value locked (TVL). DeFi Llama pegs Multichain as the largest cross-chain bridge, with about $7 billion in TVL.
A dashboard on Dune Analytics shows that the Avalanche Bridge is the largest Ethereum bridge, with about $6 billion in TVL, followed by Polygon ($5 billion TVL) and the Fantom Anyswap Bridge ($4.2 billion TVL).
