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NFT finance Leveraging Non-Fungible Tokens

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NFT finance Leveraging Non-Fungible Tokens ( nft-finance-leveraging-non-fungible-tokens )

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Chapter 2 Background 2.1 Blockchain A blockchain is a decentralized network which keeps transaction records and acts as a source of trust. The data stored on the blockchain is immutable and updated by the peer-to-peer network. The blockchain is made of "blocks", which hold transactions that have been broadcasted and verified as being valid. Public blockchains are available for everyone to join and contribute to, in com- parison to private blockchains which require permission from a central authority to become part of. Public blockchains are pseudo-anonymous because all transactions are public, however it may be hard to link them to an identity. 2.1.1 Ethereum Ethereum is a blockchain that builds on the concepts introduced by Bitcoin, there- fore it has no central entity to handle the transactions and instead all events are recorded on a blockchain. It is an open and decentralized network, secured using a consensus algorithm called Proof-Of-Work. Everything recorded on the blockchain is available to the public. Ethereum tackles similar problems to Bitcoin, having Byzantine fault tolerance, defining how coins are mined and reaching a network-wide consensus. Moreover, Ethereum enables the use of "smart contracts" which represent code executable on the blockchain in a decentralized manner by the Ethereum Virtual Machine. This enables users to build Ethereum token systems which are Ethereum sub- currencies. By combining smart contracts and tokens, Ethereum opened up the possibility to build a wide array of possible decentralized projects. 2.1.2 Nodes The nodes are the participants to the blockchain. They are all connected to each other in the peer-to-peer network. They have access to the blockchain and can 7

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