Blockchains for nonfungible token (NFT) development
One of the most popular use cases of blockchain technology is nonfungible tokens (NFTs), which are widely used to display and trade ownership of real and digital objects and intellectual property. But how do NFTs work?
What differentiates an NFT from a digital image is the use of metadata that allows NFTs to uniquely represent themselves. Unlike digital images, the metadata in NFTs helps to bestow unique properties and identifiers that can be used to represent ownership, rarity and other attributes relevant to present-day digital or physical art and property.
The process of creating NFTs involves uploading this metadata (or a data string linked to this metadata) in the form of a unique cryptographic token over an active blockchain — also known as minting. This article takes us through the various blockchains that support the underlying infrastructure of the NFT ecosystem.
NFT blockchains vs. NFT marketplaces
Without blockchains, NFTs lose their inherent properties as immutable, verifiable and unique identifiers. As a result, the NFT has found use cases as a tool to determine and validate the legitimacy of ownership across various sectors, including artwork, intellectual property, real estate and a wide range of collectibles.
NFT marketplaces are publicly accessible, allowing users to create, mint, purchase and sell NFTs. NFT creators and sellers take advantage of these marketplaces to reach out to their audiences.
Let’s talk about some of the top blockchains powering the exciting world of NFTs below.
Ordinals on Bitcoin blockchain
Bitcoin was basically developed as a peer-to-peer (P2P) money transfer protocol and not for building projects on the network itself. In this context, the Bitcoin Ordinals protocol is an interesting development, enabling one to add different types of data, including videos, images and even memes, onto satoshis, the smallest units of Bitcoin (Taproot upgrade, which enhances Bitcoin’s transaction efficiency and privacy, and Segregated Witness (SegWit), which improves block capacity. In November 2023, Ordinals surpassed 41 million inscriptions, significantly increasing Bitcoin transaction fees (by almost 1,400%).
Inscribing ordinals incurs higher costs compared to creating NFTs on alternative chains. For example, inscribing a 20-kilobyte image could cost approximately $150–$250 and take around half an hour or less.
Ethereum blockchain for NFTs
The Ethereum blockchain revolutionized NFTs by offering a more robust and developer-friendly platform, leading to the popularity and widespread adoption of NFTs. With the introduction of the ERC-721 standard, NFTs evolved into a smart contract-based tool that found financial use cases within gaming, art, tangible assets and music, to name a few.
As the NFT ecosystem took off in 2017, Ethereum introduced ERC-1155 as an official smart contract standard for supporting wide-scale NFT adoption. The older token standards, such as ERC-20 and ERC-721, required the creation of a new smart contract for each type of token. This meant that for each NFT to be transferred, the network would require the creation of a smart contract to correspond with each NFT.
ERC-1155 is a multi-token standard that introduced a smart contract interface purpose-built for transferring multiple token types at once, preventing complexity and saving on transaction costs. In 2023, Ethereum held the largest market share among NFT blockchains, accounting for 72.3% of the market with a trading volume of $8.54 billion. However, its supremacy has declined since 2022, when it held over 90% of the market share, with Bitcoin and Solana making significant gains.
The Dencun upgrade’s impact on Ethereum’s NFT transactions is indirect, yet it may influence transaction fees (gas) through network efficiency adjustments. Lower fees could spur NFT activity, while higher fees might hinder affordability. However, layer-2 Ethereum platforms hosting NFTs are directly affected, potentially becoming more appealing due to increased efficiency and reduced gas fees.
Solana blockchain for NFTs
In 2023, Solana ranked third among the blockchains dominating the NFT space with 7.4% of the market share, bringing high throughput and low fees to the table. The Solana blockchain leverages its in-house Metaplex brand umbrella to offer various tools, smart contracts and services related to NFT development. Unlike the Ethereum blockchain, Solana introduces stateless smart contracts while implementing provisions for faster and cheaper transactions. Solana uses a combination of proof-of-stake (PoS) and proof-of-history consensus mechanisms.
A couple of the main differentiating features of the Solana blockchain are the platform’s promise of censorship resistance and low transaction fees, which attract NFT artists and traders to marketplaces on Solana. Gas fees per transaction are set at 0.000005 SOL (Polygon blockchain works as the secondary layer, or layer 2 (L2), that sits on the Ethereum mainnet. As a result, the ecosystem enables users and developers to bridge portals and transfer assets from the primary mainnet to Polygon.
Polygon, akin to other Ethereum blockchain alternatives, acts as a scaling solution, aiming to notably lower transaction costs and processing times. While Ethereum’s transaction speed started at around 13 transactions per second (TPS) and theoretically aims for 100,000 TPS with sharding and proof-of-stake into action, Polygon’s L2 solution can process up to 65,000 TPS.
One of the main reasons why users tend to prefer Polygon over other popular blockchains is that it requires no upfront costs for minting new NFTs. However, the network charges a predetermined amount (usually 2.5%) as a service fee for selling the newly minted NFTs.
Cardano blockchain for NFTs
Cardano blockchain is a third-generation PoS blockchain platform that aims to solve the issues posed by the first, or Bitcoin, and second, or Ethereum, generations of platforms.
Minting NFTs on Cardano can be done by either using one of the native third-party services or by self-minting using a Cardano node, which provides the user with total control over the minted token.
Each transaction on Cardano — including minting, purchasing and selling NFTs — requires a fee in Cardano’s native token, ADA (minting and trading NFTs and wallets for storing NFTs and decentralized finance (DeFi) assets.
BNB Smart Chain (BSC) blockchain for NFTs
The BNB Chain comprises two blockchains — BNB Beacon Chain (previously Binance Chain), which supports staking, voting and other governance initiatives, and BNB Smart Chain (BSC) (previously Binance Smart Chain), which powers NFT projects and has other capabilities.
NFTs on the BNB Smart Chain are built with their compatibility with other blockchains in mind. Moreover, NFT developers choose BSC as their go-to platform for building an NFT marketplace not only because it’s cheaper and faster than the competition but also due to benefits including cross-chain and Ethereum Virtual Machine (EVM) compatibility. On BNB Smart Chain, one needs to pay a fee of 0.005 BNB (TRX) as a minimum balance. Once the NFT is created, users can compile and deploy smart contracts via Tronscan.
The difference between various NFT blockchains
The difference between various blockchains for NFTs is summarized in the table below.
A checklist to determine the ideal NFT blockchain
Choosing from the many distinct blockchains that support NFTs can be difficult. Fortunately, there are many alternative blockchains to select from, each with its own set of appealing qualities.
However, when it comes to deciding on an NFT project, it all boils down to choosing an ecosystem that comfortably meets most of the requirements, including:
- Future-proof
- Fast transactions
- Cheap gas and transaction costs
- Thriving secondary marketplace — for reselling NFTs
- Intellectual property (IP) governance
- Legitimate partnerships
- Cross-platform compatibility.
Finding a blockchain that meets the above requirements will be foundational to the success of every NFT project. The more you miss on the checklist, the lower the probability of the project’s long-term success.
