Non-fungible tokens were launched on the crypto market in 2017 by introducing Cryptokitties and Cryptopunks that have immediately caught the public’s attention. Since their debut, the sector exploded and triggered even more buzz around the Ethereum blockchain, facilitating their creation.
Why is Ethereum at the forefront of the NFT movement? Is it the only blockchain to allow the development of non-fungible tokens?
Several other blockchains host NFTs, and many other cryptocurrencies can be used to buy non-fungible tokens, so why does everyone turn to Ethereum when interested in NFTs?
Smart contracts and the ERC-721 token
Ethereum is the first blockchain to offer smart contracts that make it easier for users to transfer and own non-fungible tokens. The network developed a token standard, the ERC-721, especially for minting non-fungible tokens. It can be said that the blockchain laid the foundation for NFT development and paved the way for the cryptocurrency revolution. And since most NFT projects are based on Ethereum, wallets were developed to make it easier for users to buy Ethereum online and invest in NFT development. In addition, you can also use software like Delta app to track your investments if you have a diversified portfolio.
Are non-fungible tokens based on Ethereum?
Non-fungible tokens are compatible with all Ethereum-based projects enabling users to trade different kinds of NFTs.
While Ether is the native cryptocurrency of the network, Ethereum is the blockchain that enables the development of several types of crypto projects, non-fungible tokens being one of them. The network stores information about the transfer of non-fungible tokens, enabling them to function in the digital space.
NFTs have a unique potential, and the Ethereum network created the ERC-721 protocol to meet their special needs. Considering its newness on the market, the ERC-721 standard is distinct from other crypto projects and has a different value than other tokens.
However, just because Ethereum is the most popular network for creating and transferring NFTs, it doesn’t mean the users are restricted to it to make non-fungible tokens. Other networks like Tron, BNB Chain, Tezos, Cardano, and Solana are also used to mine and create NFTs.
Why is Ethereum the most popular blockchain among NFT enthusiasts?
Ethereum is the second largest cryptocurrency by market cap and the first network to enable the development of non-fungible tokens. Therefore, they sell for a substantially higher price on this blockchain than on other platforms. If you want to stay up to date with Ether’s price evolution use a crypto tracker which will provide you with pertinent information in real time.
Ethereum leads the decentralized finance market due to its data architecture and highly secure network, so there’s no surprise that most NFT developers prefer to base their projects using the ERC-721 protocol. Besides, thanks to its popularity in the crypto sector, Ethereum provides NFT projects with exposure to a larger public.
However, some NFT enthusiasts have also started to look for an alternative since the network increased its transaction fees. Solana blockchain is a worthy competitor because it promises to help users overcome difficulties.
Why do NFTs are based on Ethereum and not Bitcoin?
Ether aims to make Ethereum DApps and smart contract operations more user-friendly and easier to monetize than transform the network into a new monetary system. Satoshi Nakamoto created Bitcoin with the purpose of being used as a peer-to-peer electronic cash system. Ethereum has developed smart contracts that govern the transferability of digital assets and assign their ownership. Bitcoin lacks the necessary protocols to facilitate the creation of non-fungible tokens. NFTs are interchangeable, so they’re not fungible. Each Bitcoin has the same value, but each NFT is a unique asset and therefore has a distinct value.
Which are the first NFTs created on Ethereum?
Even if non-fungible tokens were developed on Ethereum, the concept first appeared in the Bitcoin network that introduced coloured coins (digital watermarks were applied to coins to track off-chain assets). The blockchain even built a platform named Counterparty to enable users to create Bitcoin-based tokens to use in blockchain-based gaming applications. By developing protocols to develop unique assets on top of the blockchain, Bitcoin developers provided the groundwork for non-fungible tokens. CryptoPunks NFTs were developed on the Ethereum network in June 2017 as a collection of 10,000 unique 24×24 pixel, 8-bit-style avatars. They are the first and most well-known collection of unique digital characters.
Crypto users minted 10,000 Punk NFTs in 8 days for free with CryptoPunks smart contracts and introduced the concept of profile picture format for non-fungible tokens (which are images that make it easier to identify an online profile). The first NFT collection and the PFP format are conventions for NFT development.
Is Ethereum the best blockchain for NFTs?
If you’re a developer looking for a network to mint NFTs, check the robustness of the smart contracts, the platform’s fee structure, transaction speed, security framework, and the forking option.
NFTs are a significant niche in cryptocurrency because they expand people’s exposure to digital tokens. Internet users who might not have considered buying cryptocurrencies are entering the market due to NFTs. Besides, non-fungible tokens contribute to the adoption of blockchain technology because they’re linked to both gaming and art.
When evaluating the blockchains that enable NFT creation, their smart contracts’ resilience is a major factor to consider because it impacts the network’s overall security. The blockchain’s smart contracts should go through extensive testing to ensure efficiency and reliability, exposing the users to a minimal risk of hacks, breaches, and downtime.
NFT developers should also consider the costs associated with NFT transactions because the blockchain must offer cost-effective solutions for developing and using non-fungible assets to attract the public.
Ethereum has been the natural choice of developers and has over 95% of the NFT marketplace in its ecosystem. However, Solana has also emerged and gained popularity over the last few years because it provides users with several benefits. Solana has lower transaction costs, and its Proof-of-stake consensus reduces the number of glitches in the system. Solana promises a more affordable and faster minting of non-fungible tokens, with higher royalties and increased throughput.
At the end of the day, the choice is up to the developer.
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Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.