The term “digital property” It only started to mean something recently. Although non-fungible tokens (NFTs) have been around for a long time, it is in the last two years that they have caught the attention of the media. In the third quarter of 2021 alone, more than USD 10 billion in volume of NFT transactions were registered in different blockchain networks, a substantial increase from the $ 1.2 billion in the second quarter.
NFTs are unique digital assets that represent ownership. As proof of ownership, NFTs range from things like art and digital collectibles to real estate and other physical assets. This is causing a tectonic shift in a wide range of industries, improving the efficiency of transfer of ownership and breaking new ground in terms of what digital assets can offer.
According Jonathan Choi, investment director of Metaplex (the Solana protocol that established open standards for the issuance and ownership of on-chain digital assets), Although NFTs are gaining traction among the general public for profile photos, artwork, and collectibles, the technology behind NFTs is far more significant.
“NFTs can serve a much broader range of use cases, including representing ownership of physical assets such as real estate, loans, luxury goods, and other digital assets such as audio, files, titles, or certificates.” he told Cointelegraph.
Like most platforms in the space of the decentralized finance (DeFi), Most of the NFT-based projects were built on the Ethereum blockchain, and it’s understandable. Ethereum is the longest-running smart contract blockchain in the world And above all, NFT vendors want to have an audience.
Beyond the domain of Ethereum
However, Ethereum’s role in the growth of the NFT industry is far greater than that of a mere hosting platform. In fact, it was arguably the now iconic ERC-721 token standard that launched the NFT revolution in the first place. CryptoKitties launched almost half a decade ago, and although the platform was very popular at its launch, it may not have taken into account the limitations posed by blockchains at the time.
Network congestion and unpredictable, and sometimes absurd, high gas rates have driven many players out of the NFT space, but this is no longer the case. Teams like Axie Infinity and Decentraland are taking the NFT and GameFi narrative further than ever. However, with an undefined roadmap for the Ethereum 2.0 update and its scalability updates, not all projects are convinced that it is the best place to settle.
CryptoKitties themselves have announced that they will be moving to their own Flow blockchain, citing issues with Ethereum’s limited performance and high fees. Although the platform is not the NFT goliath that it was, it is an iconic brand for the space, and its departure from Ethereum could lead to more projects on other networks.
“Ethereum will always be a top chain to launch NFTs and has one of the most vibrant communities in crypto, but due to some of its limitations, there will still be challenges and concerns for broader audiences and developers,” Choi added.
In particular, Networks like Cardano and Solana are making inroads into the NFT realm, with Solana even launching a $ 5 million fund this year to embed creators and their fans into its ecosystem. Solanart, the most popular NFT platform on the Solana blockchain, is making waves with users in the space, producing collections like Degenerate Ape Academy, SolPunks, Aurory, and more, with hundreds of millions of dollars traded.
“There is a lot of potential with NFTs and right now, we are seeing the exploration of what is possible,” Frederik Gregaard, CEO of the Cardano Foundation, told Cointelegraph. “For example, in decentralized finance, NFTs could be used to implement security mechanisms that guarantee the uniqueness of transactions, the correctness of each order sent and to prevent front-running attacks.”
He also mentioned other technical use cases within blockchain ecosystems, including its use as an access control mechanism for utilities and assets in public blockchains and the ability to guarantee the uniqueness of a decentralized app (DApp) from eUTXO. “Outside of the immediate ecosystem, there is a potential for mass adoption of NFTs when it comes to the property rights of individuals and communities,” added.
Although Cardano is not entering the NFTs as boldly as Solana, he is making progress. Following the success of the network’s Alonzo hard fork, which enabled smart contracts, CardanoKidz was launched this year as the first NFT project in Cardano. Last month, SpaceBudZ managed to make the first sale of NFT for more than a million dollars in the network.
Before smart contracts went live on the network, users could mint and sell NFTs without a contract address, although properties such as metadata could not be transferred through the blockchain. The addition of smart contracts attracted many more users to the platform, which has led to an increase in interest in NFTs at Cardano. However, following the introduction of Cardano’s Enhancement Proposal 25, the blockchain now has an NFT metadata standard defined for its native tokens.
This will resolve various issues related to the identity, authentication and governance of the NFTs on the network. Previous NFT representations can also be destroyed once ownership is transferred, adding a new level of uniqueness. With so much work being done on these platforms to compete with Ethereum in the NFT space, the reigning smart contract platform is undoubtedly facing some competition.
Young, dumb and not so broken
Layer one blockchain networks, such as Solana and Cardano, offer an alternative to the high transaction costs that plague the Ethereum network, while lowering barriers to entry for a wider audience. These platforms are also incredibly well positioned among developers building on Web3, as factors such as cost, speed, and community growth are vital during the development stages, especially for newer projects.
Also, with interoperability becoming the next blockchain goal, we could start to see projects launch on various platforms, then build bridges to Ethereum and leverage its large user base. However, despite the huge increase in popularity and adoption of NFTs, there is still a long way to go before this technology is used globally in all sectors.
Tor Bair, Founder of the privacy-focused nonprofit Secret Foundation, told Cointelegraph: “Today’s NFTs are more like silly receipts than smart property, with no native access control or privacy for content or buyers. If we can solve these problems, we’ll see NFTs expand to represent trillions of dollars in art. , content and physical and financial assets “.
He also stated that the various blockchain networks would have to offer new use cases and design spaces created by their unique functionality to succeed alongside Ethereum in this space, either through native data privacy, improved scalability, or global interoperability. In the long term, both Solana and Cardano could become much more used platforms in the NFT ecosystem, launching unique products on their networks to attract users.
Just this month, the world famous DJ Steve Aoki launched an NFT collection in Solana in collaboration with legendary comic book artist Todd McFarlane, marking the first time in over 30 years since you last authorized original art for sale, digital or physical.
Furthermore, Cardano and Solana are not the only layer one blockchain networks venturing into NFTs, with other platforms highlighted as Polkadot, Flow and Wax that push technology to new audiences.
“NFTs are like a golf club membership compared to cryptocurrencies, which are more like liquid money,” told Cointelegraph Abhitej Singh, co-founder of the DeFi Persistence platform, based in Cosmos. According to him, becoming a member of a golf club is subject to all sorts of factors, such as early membership, exclusivity, community, and other elements that liquid money alone cannot provide.
“The scarcity and exclusivity translate into a high social and economic affiliation cost for new members”, added.
With the arrival of new protocols such as Flow, Solana and Cardano, the complications of Web 3.0 are being abstracted, and in the coming years, NFTs could emerge as one of the greatest utilities of Blockchain technology, and not only on the network. Ethereum.