Why Is Ethereum Used For NFT
A lot of questions have been asked on this subject. People keep asking questions like “since there are other blockchains, why is Ethereum used for NFT?”
First, it is important to acknowledge that Non-fungible tokens(NFTs) have good compatibility with any Ethereum-based project, so most of the Ethereum blockchain is a composition of NFTs.
Ether (ETH) is a cryptocurrency, but because these NFTs store additional information that allows them to function in a different way than cryptocurrency, the Ethereum blockchain is used.
But do we even need Ethereum to make an NFT? The answer is NO.
Ethereum has never been a condition for creating NFTs. There are numerous blockchains for minting NFTs which include; Solana (SOL), Tron(TRX), Cardano (ADA), BNB Chain, and Tezos (XTZ).
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Why Ethereum Is More Attractive For NFTs
To a larger extent, compared to other block chains, Ethereum dominates the market in terms of volume of trade and number of buyers and sellers.
Ethereum marketplaces generate an average of $1.8 billion trading volume in a 30days cycle compared to the $120 million from the marketplaces of its competitor, Solana.
Both block chains are not yet any close to competing in the market, given that in the Q4 of 2021, the average NFT sale price in Ethereum was approximately $3000 as Solana struggled with an approximate sale price of $1000.
Ethereum blockchain is king of the DeFi world and has majority of NFT projects running on it as ERC-721 tokens because the Ethereum blockchain gives NFTs high exposure to a huge and potential market, it has a highly secure network and a sophisticated data architecture, hence, making the Ethereum NFTs more attractive and sold for for a much average higher price.
Ethereum has been found to be the best choice for NFTs investors as it has about 95% of all the NFT marketplaces on its blockchain.
Nonetheless, one problem users can have is the high volume of network traffic which causes a significant backlog that further exacerbates to increase in transaction fees.
The emerging Solana smart contract is fast catching up with Ethereum because of its unique technology and functionality. Even though its no way near Ethereum at the moment, the future is not so certain.
The most popular NFT collections in the Ethereum blockchain include CryptoPunks, the Bored Ape Yacht Club (BAYC).
Let’s talk about the distinctiveness of Ethereum NFTs and Solana NFTs.
Ethereum NFTs VS Solana NFTs
Let’s compare the Ethereum NFTs to Solana NFTs which happens to be the closest blockchain competitor.
First, both Ethereum and Solana NFTs are created with a different consensus process.
Ethereum follows the proof-of-work algorithm which is a more secure and decentralized network with less scalability.
ETH 2.0 has been designed to solve this scalability problem jeopardizing the Ethereum NFTs and its supposedly huge market share. However, it is speculated that the Ethereum blockchain may lose its high status soon unless the 2.0 upgrade is quickly engaged.
On the contrary, Solana uses a combination of proof-of-stake and proof-of-history algorithms. Even though this is less secure, it’s a more efficient method that gives room for fast and low-cost transactions with SOL(its native currency).
However, Ethereum is a sophisticated project with a substantial market position, which boosts creators’ confidence in minting NFTs on the Ethereum blockchain.
Just like Opensea is to Ethereum, SolSea is Solana’s open NFT marketplace. It allows creators to choose and integrate licenses when minting NFTs. This way, both creators and collectors know what they are selling and buying.
Solanart is another prominent Solana NFT marketplace that launched before SolSea.
Advantages Of Solana Over Ethereum
The limitations of Ethereum which were discussed earlier have motivated NFTs creators to look out for other alternatives that will address these issues. One of these alternatives is the Solana smart contract whose NFTs projects seems to measure up to Ethereum based NFTs in some ways which we are about to discuss.
- Solana uses proof-of-history consensus mechanism which guarantees high throughput of above 60,000 transactions per second (TPS).
- The Proof-of-stake mechanism also reduces technical glitches.
- There’s cheaper and faster minting of NFTs.
- The royalties paid in Solana-based NFT markets are quite higher than the of Ethereum-based marketplaces as long as the NFTs arrives the secondary market.
- The Solana also has a very low transaction cost which is less than one dollar.
The above qualities posed Solana as a very attractive NFT marketplace with a fast rising user base. One of the most popular Solana NFT collections is a collection of 10,000 unique NFT Apes called the Degenerate Ape Academy. These NFTs Apes we’re sold for over $2 million.
Why Is Ethereum Used For NFTs?
You may be wondering why most NFTs are on Ethereum and not on other blockchains which were listed earlier.
Given that the Ethereum blockchain has a highly secure network and data architecture, the decentralized finance (DeFi) market is almost nothing without the Ethereum blockchain, considering the bulk of NFT projects running on it as ERC-721 coins.
It is indisputable that the Ethereum blockchain is the chief of all other blockchains, moreover, NFTs were first born on the Ethereum blockchain. As a result of this, NFTs have a higher value and sell for averagely higher prices on the Ethereum network, hence, creators prefer it over other platforms.
The Ethereum blockchain exposes NFTs to a large and growing market. NFTs systems need to remain Ethereum virtual machine compatible so they can be supported by Ethereum wallets like Metamask.
In case you need some popular Ethereum based marketplaces where you can mint NFTs, Opensea, Rarible, and Nifty Gateway are all good ones.
Which Blockchain Is Best For NFTs
In the cryptocurrency market, NFTs are a significant niche which provides further exposure to cryptocurrencies for people who may not have been educated on them.
Talking about which blockchain is best for NFTs, some factors come into play.
First, the strength of a blockchain’s smart contracts to threats is a major component of the overall security of distributed ledger technology. It is required that smart contracts must go through thorough continued testing to ensure it provides the highest level of reliability, efficiency, and minimal risk of breaches and hacks.
Secondly, NFTs based transactions should have a cost-effective solution. This is important for the adaptation of NFT assets. Therefore, a cost-effective blockchain contract is an ideal option.
Duplicating NFTs often questions their integrity as hard forks can jeopardize non-fungible characteristics.
Therefore, it is important to mint NFTs and creates their marketplaces on fork-resistant blockchains.
Finally, the fact that blockchains are unchangeable by design, makes it ideal for attackers to target if finality is not fast enough. With faster finality, they will have little or no time to hack the digital ledgers. So, an ideal platform for creating NFT marketplaces is one with faster transaction completion.
Even though the Ethereum blockchain is the leading blockchain for creating NFT marketplaces because of the highly secure network and data architecture, it was also the blockchain on which NFTs were born. It may not retain this position for long without integrating the ETH 2.0 to solve the scalability problem jeopardising the Ethereum blockchain.
However, in choosing the best blockchain for NFT development, the decision should depend on one’s goals, budget and investment objectives.
Do further research and compare NFT blockchains before taking the big leap.