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Let's trace how Nostoc fixes nitrogen: Step 1: The Nostoc colony floats in water. Step 2: A specialized, thick-walled cell called a Heterocyst is triggered. Step 3: Inside the Heterocyst, the environment is kept strictly oxygen-free, because the special enzyme needed for work (nitrogenase) hates oxygen. Step 4: The Nostoc takes nitrogen gas (N2) from the environment. Step 5: It converts this N2 into ammonia (NH3). Step 6: This ammonia is then converted into amino acids, which are sent to the rest of the colony to help them grow and make proteins.