NFT is developing rapidly with Solana and Cardano supporting its growth. Let's see how
The term "digital property" has only recently begun to mean something. Although irreplaceable tokens (NFTs) have been around for a while, they have caught the attention of the mass media over the past year or two. NFT Blockchain trading saw more than $10 billion in NFT blockchain trade in the third quarter of 2021 alone, up from $1.2 billion in the second quarter. NFT is a unique digital asset that represents property. As proof of ownership, NFTs range from items such as art and digital collectibles to real estate and other physical assets. This is driving tectonic changes in various industries, increasing the efficiency of property transfers, and opening new foundations for what digital assets can offer.
According to Jonathan Choi, chief investment officer at Metaplex - the Solana protocol that establishes an open standard for publishing and owning digital assets in a chain - NFT is becoming increasingly popular with mass audiences for profile pictures, artwork and collectibles, the technology behind NFT is much more telling. “NFTs can have a much wider range of uses, including presenting ownership of physical assets such as real estate, loans, luxury goods, and other digital assets such as audio, files, financial statements, or certificates,” he said.
Like most platforms in the decentralized finance (DeFi) space, most NFT-based projects are built on the Ethereum blockchain - and that's understandable. Ethereum is the oldest active blockchain with smart contracts enabled worldwide, and most importantly, NFT providers want an audience.
Beyond Ethereum dominance
However, Ethereum's role in growing the NFT industry is much bigger than that of a typical hosting platform. In fact, the already iconic ERC-721 token standard may have started the NFT revolution from the very beginning. CryptoKitties was launched almost half a decade ago, and while the platform was very popular at launch, it may not have fully overcome the limitations of blockchain at the time. Network congestion and unpredictable, sometimes exorbitant gas costs have pushed many players in the NFT sector back, but this is no longer the case. Outfits like Axie Infinity and Decentraland take the NFT and GameFi story further than ever before. However, with an undefined roadmap for Ethereum 2.0 upgrades and updates to its scalability, not all projects believe this is the best place to set it up.
CryptoKitties itself has announced the move to its internal stream blockchain, citing issues with Ethereum's limited bandwidth and increased fees. While the platform is not the NFT Goliath it once was, it is an iconic brand for the space and leaving Ethereum could impact more projects on other networks. “Ethereum will always be the leading NFT startup chain and have one of the most vibrant crypto communities, but due to some of its limitations, there will still be challenges and concerns for a wider audience and developers,” added Choi.
Networks like Cardano and Solana in particular are entering the NFT area, with Solana even launching a $5 million fund this year for board manufacturers and their fans in its ecosystem. Solanart, the most popular NFT platform on the Solana blockchain, is making waves of users in the space generating collections like Degenerating Ape Academy, SolPunks, Aurory and others with hundreds of millions of dollars. "NFT has so much potential and we're looking at studies of what's possible," said Frederick Gregor, CEO of the Cardano Foundation, about the uniqueness of transactions, the accuracy of each order placed, and the prevention of prior attacks. "
He also mentioned other technical applications in the blockchain ecosystem, including its use as an access control mechanism for utilities and assets on public blockchains and the ability to ensure the uniqueness of decentralized eUTXO applications (DApps). "Beyond the immediate ecosystem, there is potential for mass adoption of NFTs in terms of individual and community property rights," he added. Even though Cardano wasn't as brave as Solana in NFT, he was making progress. After Alonzo's successful hard fork in the network enabling smart contracts, CardanoKidz kicked off this year as Cardano's first NFT project. Last month alone, SpaceBudZ made its first online NFT sale for over $1 million.
Before smart contracts were operated online, users could still extract and sell NFTs without a contract address, although properties such as metadata could not be transferred via the blockchain. The addition of smart contracts attracted more users to the platform, which on Cardano resulted in a surge in interest in NFT. However, since the introduction of Cardano Improvement Proposal 25, the blockchain has had a defined NFT metadata standard for its own token. It solves various problems related to identity, authentication, and management of NFT in the network. Previous NFT offices can also be demolished once ownership is transferred, adding a whole new level of exclusivity. With so much work being done on this platform to compete with Ethereum in the NFT space, smart contract management platforms are certainly in for some competition.
Young, boring and not too broken
Single-tier blockchains such as Solana and Cardano offer an alternative to the high transaction fees that plague the Ethereum network while reducing barriers to entry for a wider audience. The platform is also very well positioned with Web3 developers as factors such as cost, speed and community growth are critical in the development phase, especially with newer projects. Moreover, as interoperability becomes the next target for blockchain, we can start launching projects on different platforms just to build bridges with Ethereum to take advantage of the large user base. Despite the immense popularity and acceptance of NFT, there is still a long way to go before this technology can be used in various industries around the world.
Thor Bair, founder of the secret nonprofit Secret Foundation said, “NFTs today are more of a dumb receipt than a smart property with no natural access control or privacy for content or buyers. If we can solve this problem, we will see NFT thrive, representing trillions of dollars in art, content, and material and financial assets. He also said that in order to succeed with Ethereum in this area, whether through natural data confidentiality, increased scalability or global interoperability, blockchains must offer new uses and design leeway created by their unique functionality. In the long term, both Solana and Cardano could become much more common platforms in the NFT ecosystem, introducing unique products in their networks to attract consumers.
Just this month, world-renowned DJ Steve Aoki released the NFT collection for Solana in collaboration with comic book icon Todd McFarlane, making it the first time in more than 30 years since he last allowed the sale of original, digital or physical artwork. Moreover, Cardano and Solana are not the only single-tier blockchains migrating to NFT as other popular platforms like Polkadot, Flow, and Wax are targeting the technology to a new audience. “NFT is like golf club membership versus cryptocurrency, which is more like cash,” Abhitei Singh, co-founder of Cosmos DeFi-based Persistence platform, said. According to him, membership in a golf club depends on various factors including initial membership, exclusivity, community and other elements that easy money alone cannot provide.
"These shortcomings and exclusivity result in high membership fees for new members, both socially and economically," he added. With the advent of new protocols such as Flow, Solana, and Cardano, the complexities of Web 3.0 are abstracted away, and in the next few years NFT could become one of the biggest blockchain utilities, not just on the Ethereum network.