The crypto world is now flooded with buzzwords like NFTs, short for Non-fungible Tokens and Metaverse. A result of the inevitable evolution of blockchain technology, the growing popularity of NFTs is opening another front in the application of cryptocurrency’s underlying technology, further driving its adoption to new levels.
While a lot of veteran crypto community members have comfortably embraced this new class of digital assets to reap benefits, those who are new to this field are still trying to wrap their minds around it. So, in this article, we are going to briefly explain NFTs, the technologies behind it and answer a few lingering questions like why people are flocking NFTs, how the ecosystem can benefit from multichain NFTs and more.
For the uninitiated, let us start from the basics.
What are NFTs?
Most of us know about cryptocurrencies – the digital assets that enable P2P transfer of value by recording transactions on a decentralized, immutable, and transparent ledger called the blockchain which was championed by Bitcoin. Since then, the cryptocurrencies have gone through lots of improvements with blockchain serving as the foundation for various other decentralized finance (DeFi) applications. As a medium for store and exchange of value, all cryptocurrencies are designed to be fungible digital assets, meaning, each token of a particular cryptocurrency holds the same value as another and can be exchanged or transferred interchangeably just like our bank notes.
However, that’s not the case with NFTs. NFTs are digital assets on blockchain that share almost all the properties of other cryptocurrencies except for an important one – fungibility.
It is all in the name, “non-fungible tokens”. The fungible character is replaced by uniqueness. Each NFT is a unique digital asset or a token on the underlying blockchain that can be stored, transferred, and even traded like regular cryptos.
If NFTs aren’t like cryptocurrencies, why do people buy them?
The answer to this question lies in the very fact that each NFT is unique by itself. It is the NFT’s characteristics of being unique that makes it ideal as a digital collectible or a tokenized representation of other digital or physical assets. The popular use case of NFTs remains in the art world for now, which is rapidly expanding to cover other verticals as well. Today, we can find tokenized representations of paintings, multimedia assets, luxury, and lifestyle products and even automobiles and real estate.
The NFTs by themselves, depending on the creators and the market demand hold value as collectibles. Similarly, as tokenized representations of other real-world assets, they establish the ownership of a certain physical or a digital asset to the one in possession of the respective NFT. Tokenization of assets using NFTs makes it easier for the owner to establish proof of ownership, sell, trade, and auction the underlying asset just the way they would execute a crypto transaction. It also helps in establishing the provenance of the asset as all NFT transactions are recorded on the blockchain.
All these advantages of NFTs makes them assets of interest for the community as people buy them for their value as a collectible or acquire the underlying tokenized asset by purchasing related NFTs.
An Overview of 5 Different Blockchain Protocols for NFTs
It is now clear that the NFT and cryptocurrencies share many similar traits, which holds true even when it comes to the infrastructures. The NFT ecosystems are built on different blockchain protocols based on the respective ecosystem’s needs. Each of these protocols come with their own list of advantages and disadvantages which we have outlined below.
The first programmable blockchain that introduced the concept of smart contracts and even supported some of the popular early NFT projects. With widespread adoption and a huge community of developers and users, Ethereum continues to be the preferred protocol for NFT projects. It is worth noting that the well-known CryptoKitties project which made NFTs popular was built on Ethereum protocol. However, increased adoption of the protocol has brought a lot of issues to the surface. If we were to list some of them, here’s how it will be.
- Ethereum is a considerably more mature protocol in the lot, which makes it more stable and secure compared to other alternatives.
- It offers high levels of decentralization with additional security offered by PoW consensus mechanism.
- A significantly larger community of developers and users on Ethereum translates to more opportunities for creators to build NFT ecosystems by minting a variety of NFT assets.
- Multiple ecosystems and secondary marketplaces offer greater opportunities for the users to list, trade and auction NFTs.
- The greater liquidity on Ethereum protocol could mean more NFT transactions.
- Ethereum protocol continues to face scalability issues due to its limited transaction processing capabilities, leading to increased transaction (gas) fees.
- Higher gas fees escalate the cost of building and maintaining NFT ecosystems. NFT traders are sometimes forced to pay more than the NFT’s worth for listing or buying the NFTs across both primary and secondary NFT marketplaces.
Binance Smart Chain
Binance Smart Chain (BSC) is a product of one of the largest cryptocurrency exchange and trading platforms. The EVM compatible protocol provides an inexpensive alternative to the Ethereum protocol when it comes to minting and trading NFTs. But there are few things one needs to consider before opting for BSC to meet their NFT needs.
- The main advantage of BSC over Ethereum protocol is the cost. The NFT minting fee on BSC is as low as 0.03 BNB, and the transaction costs in today’s numbers are far lower than that of Ethereum protocol.
- Unlike Ethereum, BSC fares a lot better when it comes to scalability as the network has a much higher transaction throughput at far lower transaction fees.
- The weight of one of the prominent entities in the crypto industry behind BSC, combined with a strong community further increases its reliability.
- As an EVM (Ethereum Virtual Machine, a software platform that supports dApps on Ethereum protocol) compatible chain, BSC supports Solidity which makes it easier for developers and NFT creators to easily migrate their creations from Ethereum to BSC.
- Binance’s own NFT marketplace provides a reliable, easy to use platform for creators to list and trade their creations with a diverse user base from across the world.
- The degree of decentralization on BSC is much lower than that of Ethereum or other open source blockchain protocols.
- As the creator of BSC, Binance holds considerable influence on the operations of Binance Smart Chain. Any development impacting Binance may have a considerable effect on the NFTs and other crypto ecosystems on the network.
A promising blockchain protocol that has successfully overcome initial teething problems, Tezos has gained significant traction in recent years. It is a one-of-a-kind self-amending blockchain protocol with growing adoption among the crypto and conventional business communities alike. Some of the well-known brands and personalities across various domains including McLaren Racing, Mike Shinoda of Linkin Park fame and more have opted for Tezos to create and sell their NFTs.
- The self-amending blockchain comes with a modular infrastructure and upgrade mechanism for constant updates with minimal or zero interruptions which ensures long term viability of digital assets created on the platform while keeping the doors open for innovative applications and improvements in the future without impacting decentralization.
- It is one of the fastest growing NFT ecosystems favored by big names in fashion, lifestyle, motorsports, and other industry segments.
- The proof of stake consensus protocol on Tezos helps bring down the transaction costs of NFT sales and auction, which is further amplified by the rapid growth in the number of marketplaces.
- Tezos is a relatively new ecosystem that is still gaining adoption which limits the visibility of the NFTs currently minted on the protocol
- The resources in terms of developer community and documentation are still limited, and it will take time before the community grows to a scale that will make it more beginner friendly.
- It uses a considerably new, Liquidity high level programming language to create smart contracts over the protocol. The protocol is not EVM compatible by design. However, there are other development tools that can be used to write and execute smart contracts in Solidity.
Polkadot is an emerging proof of stake blockchain protocol that intends to make multichain functions a reality. The protocol adopts a relay and parachain model where the relay chain acting as the foundation while the associated parachains with their functionality as sovereign blockchains supports smart contracts deployment, enabling the development of dApps while having the capability to interface with other blockchains with the help of bridges. The Polkadot ecosystem is still gaining adoption in the NFT ecosystem with a handful of projects successfully launched on Kusama Canary Network. The project has developed Unique Network – a NFT specific chain that interfaces with Polkadot and Kusama chains.
- Polkadot introduces cross-chain capabilities as part of its protocol to enable the creation of multichain NFTs. By minting NFTs on Polkadot, creators will be able to deploy their digital assets on not just Polkadot but also Kusama and Ethereum networks
- The availability of NFT specific protocol provides a scalable blockchain infrastructure, with plenty of whitelabelling opportunities for the community
- The Polkadot ecosystem is still in its nascent stages, with lots of features still in the development stage. While the Kusama Canary network replicates most of the Polkadot features, there is no definitive timeline or confirmation about the existing projects on Kusama being adopted onto the mainnet at the moment.
- Polkadot has a much smaller community in comparison to other blockchain protocols.
- There are also security concerns surrounding the Polkadot infrastructure following multiple exploits of its code vulnerabilities.
- Polkadot uses Rust as the primary programming language along with the Substrate framework.
Solana deviates from all the abovementioned protocols by adopting a different approach towards creating highly scalable and inexpensive blockchain protocol. It adopts a combination of proof of history and proof of stake consensus mechanisms to achieve the objective. The advantages offered by Solana has turned it into one of the fast-growing protocols, amid concerns about the levels of decentralization it offers.
In recent times, Solana has attracted a lot of NFT ecosystems on the protocol, thanks to low costs and ease of development. But whether it will be able to live up to the expectations is a different thing altogether.
- A scalable blockchain protocol with high transaction throughput and low fees makes it ideal for NFT creators.
- The rising adoption and increasing number of NFT marketplaces on Solana is a welcome addition. Most of these NFT platforms make minting, trading and auctioning NFTs a lot easier.
- As a budding blockchain protocol, Solana comes with a lot of room for growth and has the backing of a fast-growing community and decent liquidity.
- Solana allows users to build dApps using multiple languages including Rust, C++ and C#
- Relatively new, with low adoption and liquidity as compared to more established protocols makes it a hit or miss when it comes to achieving fair valuation for NFTs
- The level of decentralization of the Solana protocol is relatively low compared to other protocols. The blockchain seems to sacrifice decentralization in favor of speed and scalability.
- Low overhead costs have lowered the quality of NFTs being launched on the protocol.
Is it possible to launch an NFT project on multiple blockchain networks?
The comparison of some of the leading blockchain networks for NFT applications show that none of them are perfect. They all appear to offer few significant advantages over their peers, along with their own set of disadvantages. The only way to strike a balance is to leverage the best features on offer from each protocol to meet the actual industry demands. It can be achieved by creating NFTs that are compatible with more than one blockchain. The concept of multichain NFTs is born from such a need.
Polkadot is clearly working on making multichain NFTs a reality. However, in the absence of a definitive timeline, the solution may be years away. Meanwhile Singapore-based fintech award-winning blockchain solutions provider ShuttleOne is making rapid progress in adding support for multichain NFTs on its already existing Metachain.
ShuttleOne Metachain for Multichain NFTs
The ShuttleOne Metachain, is the multichain aggregator that enables developers to create a single application that can work on multiple supported blockchains with the help of Metachain Aggregator and Bridge. Unlike conventional bridges, the Metachain bridge enables two-way interaction and transfer of assets between multiple protocols. The $SZO token acts as a universal token within the Metachain ecosystem, enabling users to pay the transaction fees equivalent in $SZO across all supported protocols. Currently, the ShuttleOne Metachain supports Ethereum, Binance Smart Chain and Tezos, with more networks set to be added soon.
The Multichain NFT capabilities on the ShuttleOne Metachain will be an extension of its existing multichain interoperability capabilities to include NFTs along with cryptocurrencies. Using the ShuttleOne Multichain NFT ecosystem, creators will be able to mint NFTs that can be listed, transferred, traded, or auctioned across multiple blockchains and NFT marketplaces, while maintaining its uniqueness throughout.
Benefits of Multichain NFTs
The interoperability between multiple blockchains enables NFT creators to reach a wider audience across different protocols, with access to virtually limitless liquidity. The wider access also translates to creators and sellers getting the right valuation for their NFTs with ample avenues for discovery by the buyers. Meanwhile, buyers can benefit from price comparison for NFTs across different protocols and marketplaces, while enjoying an option to pay with their preferred cryptocurrency on the platform with the least transaction fees.
Multichain NFTs are already touted as the future of the NFT industry, and the traction received by metaverses being developed on different protocols will further expand the utility of these multichain NFTs.
Explaining ShuttleOne’s initiative to support multichain NFTs, the CEO and Founder Zhuang said, “Explosion of NFTs will usher mass adoption of cryptocurrencies, not [crypto]trading. Ethereum continues to dominate the NFT space. But a lot of creators including industry players like music record labels, real estate developers, real estate brokers, automobile manufacturers are concerned by high gas fees. The upcoming multichain NFT support on ShuttleOne Metachain will provide more options, flexibility, and visibility to these creators, enabling them to maximize the value of their creations by tapping into more liquidity and marketplaces across the entire ecosystem.”
Multichain NFT support on the Metachain is one of the many intuitive, seamless, and creative products that ShuttleOne is working on introducing to the crypto industry. Listen more on the concept of Multichain NFT here on this ShuttleCast podcast episode by ShuttleOne.
ShuttleOne is an operating system that allows all applications and products to adopt and run on multiple blockchains, create interoperability between different blockchain protocols and user-friendly crypto experience. By building on Metachain - the Multichain Ecosystem by ShuttleOne - developers will be able to build their product simultaneously on multiple blockchain networks at the same time, while keeping the maintenance work low and effective.
ShuttleOne is the winning award start-up in Singapore by working closely with fintech and real-world industries who are adopting blockchain into their industries.
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