The idea of NFTs originated with Colored Coins, an open-source protocol built on Bitcoin, enabling users to represent and manipulate immutable digital resources. Specific Bitcoins were “colored” to tell them apart from the rest. The concept dates back to 2012-2013. Vitalik Buterin later developed Ethereum, a better investment. You can monitor the ETH price to make informed decisions about buying, selling, and trading. Terra Nullius was the first NFT on Ethereum, allowing users to stake their claims on the blockchain. More exactly, when an NFT holder claimed a stake, users could write a short message to customize it. Since NFTs exploded in popularity, the situation has only gotten more complicated.
NFTs took off during the crypto bull run, ignited immediately with the start of the 2021 trade. On November 24, Collins Dictionary designated NFT its “Word of The Year.” What happened was that, in less than a year, blockchain-based tokens went from being an obscure technicality to a maturing asset class. Most NFTs are part of the Ethereum blockchain, but it’s not the only platform that can support cryptographic collectibles. Examples include but aren’t limited to Solana, Cardano, Polygon, Flow, and EOS. Simply put, any blockchain with smart contract capabilities can support NFTs, which explains why some have thriving ecosystems.
The Ethereum Blockchain Enables NFTs, Which Store Extra Information
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The emergence of blockchain technology has brought about a wide range of digital items, each with its unique properties and applications. Fungible and non-fungible tokens represent two prominent examples. Fungible tokens, like cryptocurrencies, can be exchanged for one another on a peer-to-peer basis as they have equal value. They have no particular traits to set them apart. By contrast, non-fungible tokens are unique, so they can’t be replaced or interchanged with other tokens. What’s more, they’re indivisible, meaning you can’t send fractions of an NFT. As a rule, NFTs serve as proof of ownership of digital assets like art or collectibles.
The Ethereum blockchain accommodates NFTs, which store additional information that allows them to function differently from cryptocurrencies. They’re created via a process called minting, which involves publishing a digital asset to the blockchain so it can be bought, sold, and, most importantly, traded. The minting process entails the creation of a new block. The information is confirmed by a validator, after which the block is closed. As mentioned earlier, smart contracts are used for the creation of NFTs and the governance of their transferability. Each NFT can represent a different underlying asset and have a distinct value.
The ERC-721 Standard Was Created to Address the Need for Unique Tokens
ERC-721 is the first bona fide NFT token standard, introduced by Deeper Labs’s P2E CryptoKitties collection. The bulk of NFT projects run on the Ethereum blockchain as ERC-721 coins. The standard for representing ownership of non-fungible tokens was advanced by William Entriken, Jacob Evans, Dieter Shirley, and Nastassia Sachs in 2018 – it’s a template or guideline that other developers must follow. The most popular use case for ERC-721 tokens is NFTs in gaming, used to represent items like weapons, characters, or virtual real estate. ERC-721 defines a minimum interface a smart contract must enforce to allow unique tokens to be managed, owned, and traded. It doesn’t restrict supplemental functions.
It’s Indisputable That Ethereum Is the Best Blockchain for NFTs
The two biggest mysteries of blockchain technology take the form of cryptocurrencies and NFTs. Both have entered the public consciousness around the same time and represent alternative investment vehicles dominated by young buyers, sellers, and traders. NFTs tend to be more secure than cryptocurrencies because they’re not subject to double-spending attacks. The Ethereum ecosystem emerges as the most promising blockchain to host and trade NFTs due to its highly secure network and data architecture. Blockchain-based assets are created using smart contract technology, which enables the development of rare, indivisible digital assets. There’s a larger pool of buyers on Ethereum, so NFTs sell for a considerably higher price.
Since many projects are based on Ethereum, wallets like MetaMask are designed to be compatible with the Ethereum Virtual Machine (EVM). More than half of transaction activity on major EVM chains involves NFTs; the use cases for EVM compatibility are growing as tech leaders keep on innovating. The EVM is a core part of Ethereum because it executes smart contracts, processes transactions, and updates account balances. NFT creators must ensure their projects are EVM-compatible to attract users. Unlike Solana, Ethereum is a mature project with a significant market position, not to mention a wide range of development tools and resources.
Ethereum’s Popularity Is a Double-Edged Sword, Causing A Lot of Problems
The underlying complexity of the smart contract system makes Ethereum one of the most popular blockchains for NFTs. Nonetheless, there are some downsides to Ethereum’s popularity. To be more precise, the large number of projects leads to an influx of network traffic, which in turn leads to skyrocketing transaction fees. Not only do transactions take a lot of time to process, but also users are forced to pay higher fees to prioritize their transactions. Scaling is often viewed as the biggest impediment to the mass adoption of Ethereum, so if blockchain technology were to reach mainstream usage, the network wouldn’t be able to handle the increased traffic.
In 2021, Ethereum launched Immutable X, a Layer-2 scaling solution focused on enhancing the usability of NFTs by addressing the high costs and slow speed of the underlying network. It provides zero gas fees, carbon neutrality, and the ability to process 9000 transactions per second. Immutable X relies on zero-knowledge rollups to achieve scalability, which use validity proofs and complex mathematics to establish the validity of transactions. It’s worth mentioning that Immutable X ingeniously structures ERc-721 metadata – users can make a category-wide bid, which is helpful for games like Gods Unchained that have billions of in-game assets.
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Conclusion
NFTs provide exposure to cryptocurrency for people who wouldn’t normally come into contact with these digital assets. When selecting a blockchain for minting NFTs, whether Ethereum or any other option, be certain of the vigor of its smart contracts, check the fee structure, and examine the possibility of forking.