NFT technology and stave coins

NFT technology

Non-Fungible Token (NFT) technology is a blockchain-based technology for expressing ownership and uniqueness of digital assets, with the following characteristics

1. Establishing uniqueness and ownership: an NFT is a token that establishes the uniqueness of a digital asset (e.g. image, audio, video or game item), where each NFT has a unique identifier and different characteristics from other tokens of the same type. This allows ownership of digital assets to be assigned to a specific person or entity.
2. Transparency and trustworthiness: NFTs serve to increase the transparency and trustworthiness of digital assets, as they maintain a transaction history on the blockchain. To prevent data tampering and forgery, transactions can be verified and confirmed on the distributed network, thereby guaranteeing the legitimacy and transaction history of digital assets.
3. Interactivity and programmability: NFTs can be used in conjunction with smart contracts, whereby the ownership and terms of use of NFTs can be programmemable through smart contracts. For example, artists can incorporate mechanisms into smart contracts to receive royalties for their own work.
4. New revenue streams for digital creators: NFTs may provide new revenue streams for digital creators, who can earn revenue directly by registering and selling their work in the NFT marketplace, and also when their work is bought and sold in secondary transactions. may be eligible to receive royalties.
5. Protection and preservation of digital assets: NFTs can also help protect and preserve digital assets, with the tokenisation of NFTs allowing digital assets to be held permanently on the blockchain. This reduces the risk of digital assets being lost or tampered with.

NFT technology has a number of advantages, including protecting the ownership and uniqueness of digital assets and providing new revenue streams for digital creators, and the NFT market is currently growing rapidly, with the technology gaining attention across a range of industries.

Algorithms used for NFT

Algorithms used for NFTs generally include the following

1. Hash functions: hash functions are used to ensure the uniqueness of NFT token identifiers and digital asset contents. Typical hash functions include SHA-256 and Keccak.
2. Asymmetric key cryptography: asymmetric key cryptography may be used for NFT ownership transfer and digital signatures. Typical asymmetric key cryptography algorithms include RSA and Elliptic Curve Cryptography (ECC).
3. Smart contract language: NFT smart contracts are usually written on a specific blockchain platform. Each platform has its own dedicated language or specification for writing smart contracts, for example, Ethereum uses a language called Solidity.
4. Cryptographic primitives: cryptographic primitives may be used for NFT security. For example, digital signatures and public key cryptography are used.

These algorithms and techniques are used to ensure the uniqueness, security and transactional legitimacy of NFTs, and their specific implementation and selection depends on the blockchain platform used and the purpose of the NFT.

stable coin

Stablecoins are cryptographic assets (virtual currencies) whose value is pegged to the price of a legal tender or commodity (e.g. the US dollar or gold), whereas regular virtual currencies are often unsuitable for daily transactions and value preservation due to their volatile price, stablecoins are designed to maintain price stability. They are designed to keep the price stable. This makes them easier to use as a means of payment with less risk of price volatility.

Types of stablecoins include.

1. legal tender-backed stablecoins: the most common type, which are backed by legal tender. For example, USDT (Tether) is backed by US dollars, which keeps the value of one USDT approximately equivalent to one US dollar. The legal tender backing makes it easier to maintain price stability, but requires trust in the central controller (issuer).

2. crypto-asset-backed stablecoins: these are backed by other crypto-assets to maintain price stability. For example, DAIs are designed so that the value of one DAI approaches USD 1 by using a virtual currency such as Ethereum as collateral. To deal with the risk of price volatility of crypto-assets, an over-collateralisation method is used, in which a larger amount of crypto-assets are usually held as collateral.

3. algorithmic stablecoins: these are not backed by a specific asset and use an algorithm to adjust supply to stabilise the price. As the supply is increased or decreased in response to demand, there is no need for the issuer to hold legal tender or crypto assets, but there is also a risk of sharp price fluctuations.

Advantages of stablecoins include the following

• Price stability: stable prices make it easier to avoid the volatility risk of virtual currencies.
• Convenience as a means of payment: easy to use for purchasing goods and international remittances.
• Use on exchanges: on virtual currency exchanges, they are also used as a temporary means of retreat in exchanges for other virtual currencies.

Possible risks of stablecoins include the following

• Centralised risk: legal tender-backed stablecoins are dependent on the issuer and therefore subject to credit risk.
• Regulatory risk: as they are tied to legal tender, they are susceptible to national financial regulations.
• Algorithmic risk: failure to adjust supply may result in large price fluctuations.

Stablecoins are an important element for the development of the virtual currency market and blockchain technology, particularly in digital payments and international remittances, but they also carry issuer- and technology-dependent risks.

Stablecoin and web3

Stablecoin and Web3 complement each other and are key elements in the foundation of the digital economy: the basic concept of Web3 is to make the internet a more decentralised, user-driven platform, allowing users to control their own data and to reduce their reliance on centralised platform, reducing dependence on it and creating an open and accessible ecosystem. This, combined with stablecoin, will play a variety of roles.

Web3 is built on crypto-assets (virtual currencies) and blockchain technology, but regular crypto-assets have been difficult to use as a practical payment method because their prices are highly volatile. Stablecoins have attracted attention as a means of solving this problem. By providing price stability, they have become a virtual currency that is easy to use in a variety of Web3 applications and are an important component of the Web3 ecosystem.

The main applications of stablecoins in Web3 include.

1. decentralised finance (DeFi): stablecoins play a central role in decentralised finance (DeFi) projects, where their stable price makes them less risky in financial services such as borrowing, lending and earning interest. For example, stablecoins are often used as asset collateral on DeFi lending platforms and as a stable currency for transactions on exchanges.

2. purchase of NFTs and digital assets: stablecoin is also often used in the purchase of NFTs (non-replaceable tokens) and digital assets, where its price stability makes it a secure currency for users to purchase assets, as it allows transactions with less risk of volatility.

3. decentralised autonomous organisations (DAOs): DAOs refer to decentralised organisations used for governance on the web3, where stablecoins enable voting and payment of rewards using stable tokens within the organisation. They are less susceptible to price fluctuations, which makes them easier to manage budgets.

4. cross-border payments and remittances: stablecoins are attracting attention as a means of global transactions and payments on the Web3. They enable international money transfers without relying on the traditional banking system, with lower fees and shorter transfer times.

5. currency in metaverse and virtual worlds: stablecoins could also be used as a stable currency in metaverse (virtual space) and games. In particular, their price stability, which is close to their real-world value, facilitates economic activity in a web3-based virtual economy.

The benefits of stablecoin and its impact on Web3 include

• Encouraging user adoption: having a price-stable currency as a means of payment in Web3 applications makes it easier for ordinary users to participate in digital services. Less price volatility makes it easier for users to feel secure and creates an environment in which crypto-asset novices can easily use the service.
• Improved stability of the token economy: there are many token economies in Web3, and stablecoins will stabilise their base and contribute to reducing the risk of price volatility. This improves the overall reliability of the Web3 project and supports the development of the ecosystem.
• Reducing regulatory and security risks: in the aim of decentralising Web3, stablecoins are also used as a means to minimise regulatory and security impacts. In particular, stablecoins backed by legal tender are more co-ordinated with regulators and often have lower legal risks.

As Web3 expands, stablecoins are expected to play an even more diverse role; for example, central bank digital currencies (CBDCs), which are being developed by central banks in various countries, could work with Web3 to make them more user-friendly. The development of stablecoin regulation is also expected to make it easier for financial institutions and companies to enter the Web3 space, leading to the growth of the digital economy as a whole.

Examples of NFT and stable coin implementations

Examples of Non-Fungible Token (NFT) and Stable Coin implementations are mainly done using blockchain technology. An overview and implementation examples of each are given below.

1. examples of NFT implementations

NFTs are implemented on blockchains such as Ethereum and Polygon based on token standards such as ERC-721 and ERC-1155.

Implementation overview.

• Programming language: Solidity (used for Ethereum smart contract development)
• Platforms: Ethereum, Polygon, Binance Smart Chain, etc.
• Frameworks: Truffle, Hardhat

Basic smart contract examples: The following are basic NFT smart contract examples based on the ERC-721 standard:

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.0;

import "@openzeppelin/contracts/token/ERC721/ERC721.sol";
import "@openzeppelin/contracts/access/Ownable.sol";

contract MyNFT is ERC721, Ownable {
    uint256 public nextTokenId;

    constructor() ERC721("MyNFT", "MNFT") {}

    function mint(address to) public onlyOwner {
        uint256 tokenId = nextTokenId;
        _safeMint(to, tokenId);
        nextTokenId++;
    }
}

Main functions

• Publishing NFTs (Minting): issue NFTs to specific addresses using the mint function.
• Ownership management: ownership is tracked according to the ERC-721 standard.
• Token transfer: token can be transferred as a standard feature.

2. stable coin implementation example

Stablecoins are commonly built on the ERC-20 token standard. They stabilise prices by pegging their value to legal tender or other assets.

Implementation overview.

• Programming language: Solidity
• Platforms: Ethereum, Avalanche, Tron, etc.
• Framework: utilises OpenZeppelin’s ERC-20 implementation

Basic smart contract examples: The following is a simple example of a stave coin based on the ERC-20 standard:

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.0;

import "@openzeppelin/contracts/token/ERC20/ERC20.sol";
import "@openzeppelin/contracts/access/Ownable.sol";

contract StableCoin is ERC20, Ownable {
    constructor() ERC20("MyStableCoin", "MSC") {
        _mint(msg.sender, 1000000 * 10 ** decimals());
    }

    function mint(address to, uint256 amount) public onlyOwner {
        _mint(to, amount);
    }

    function burn(uint256 amount) public {
        _burn(msg.sender, amount);
    }
}

Main functions.

• Token issuance and burn (Burn): mint and burn functions manage supply.
• Fixation of value: realistic pegs (e.g. 1 MSC = 1 USD) require off-chain auditing and collateral systems.
• Basic ERC-20 functions: checking balances, transferring tokens, etc.

3. post-implementation operations

• Deployment: deploy smart contracts to the blockchain (e.g. using Infura or Alchemy).
• Interaction with front-end: build user-enabled interfaces using Web3.js or Ethers.js.
• Use cases:
  • NFT: digital art, game items, membership cards, etc.
  • Stablecoin: for use in payments, remittances and DeFi (decentralised finance).

In real projects, these basic features are extended to implement additional functionality appropriate to the use case.

reference book

Reference books on NFTs and stablecoins are described below.

Reference books on NFTs.
1. ‘Mastering Blockchain: Unlocking the Power of Cryptocurrencies, Smart Contracts, and Decentralized Applications’.
– Author: Imran Bashir
– Abstract: Covers a wide range of topics, from the basics of blockchain in general to the implementation of NFTs and smart contracts.

2. ‘NFT: From Zero to Hero’
– Author: Anndy Lian
– Summary: Explains the fundamentals of NFTs, practical examples and market trends, and provides knowledge on building and trading NFTs.

3. ‘Token Economy: How the Web3 reinvents the Internet’.
– Author: Shermin Voshmgir
– Abstract: Explains how to design and utilise the token economy in general, including NFTs.

4. ‘Ethereum Smart Contract Development: Build Blockchain-Based Decentralized Applications Using Solidity’.
– Author: Mayukh Mukhopadhyay
– Abstract: Focuses on how to use Solidity to build smart contracts such as NFTs.

Reference books on stablecoin.
1. ‘The Infinite Machine: How an Army of Crypto-hackers Is Building the Next Internet with Ethereum’.
– Author: Camila Russo
– Abstract: Allows an indirect understanding of the role of stablecoins and how they are implemented, while learning about the history and origins of Ethereum.

2. ‘Building Ethereum DApps: Decentralised Applications on the Ethereum Blockchain’.
– Author: Roberto Infante
– Abstract: Explains the building of Decentralised Applications (DApps) on Ethereum with the example of Stablecoins.

3. ‘Stablecoins and Their Risks to Financial Stability’.

4. “Decentralized Finance Unlocked: Your Guide to Mastering the DeFi Ecosystem”

Online teaching materials and resources.
– CryptoZombies.
Interactive material ideal for learning Solidity, where you can learn about NFTs and tokens in a game format.

– OpenZeppelin official documentation
Detailed examples of how to use the library for implementing NFTs and ERC-20 tokens.