NFTs 101
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Last updated
Non-Fungible Tokens (NFTs) are a type of digital asset that represents ownership of unique items or data. Unlike cryptocurrencies, which are mutually interchangeable, each NFT is distinct and non-fungible. The ERC-721 standard, written in Solidity language on the Ethereum blockchain, was created in 2018 to tokenize ownership of any arbitrary data and provide a means for creating interchangeable NFTs. We will explore the history of NFTs, including their relationship to the crypto-punk movement and the development of the ERC-721 standard. We will also examine a variation on the ERC-721 standard, ERC-1155, and compare and contrast the differences between NFTs on the Ethereum, Solana, and Cardano blockchains.
NFTs have their roots in the crypto-punk movement of the late 2000s. Crypto-punks were a collection of 10,000 unique 8-bit images, each with its own identifying number. They were one of the first examples of a digital asset with a limited supply and unique characteristics. However, it was not until the advent of the ERC-721 Token Standard and Opens Sea that we would recognize the NFTs we know and love today.
The ERC-721 standard was created in 2018 by William Entriken, Dieter Shirley, Jacob Evans, and Natassia Sachs. It builds on the ERC-20 token currency standard most meme coins use and is designed to provide a means for creating non-fungible tokens. ERC-721 tokens are unique and non-interchangeable, making them ideal for representing ownership of unique items like digital art.
The development of ERC-721 coincided with the rise of the crypto-punk movement. Crypto-punks were one of the first examples of a limited supply, unique digital asset, and they served as a model and inspiration for the development of the ERC-721 standard. The success of crypto-punks demonstrated the demand for unique digital assets, and ERC-721 provided a means for creating and trading them on a large scale.
While ERC-721 was a significant step forward for NFTs, it has its limitations. One of the main challenges with ERC-721 is that each token is unique and non-interchangeable, which can make it difficult to create tokens that represent multiple items. To address this issue, the ERC-1155 standard was developed.
ERC-1155 is an extension of ERC-721 that allows for the creation of both fungible and non-fungible tokens. This makes it possible to create tokens that represent multiple items of the same type, as well as unique items. For example, a game developer could create a single token that represents 100 swords, each with its own unique characteristics. ERC-1155 is a more flexible standard than ERC-721, and it has gained popularity in the gaming industry.
While Ethereum was the first blockchain to support NFTs, other blockchains have since developed their own standards for creating and trading NFTs. Solana and Cardano are two examples of blockchains that support NFTs, and there are some key differences between their NFT ecosystems and Ethereum's.
One significant difference between Solana and Ethereum NFTs is that Solana NFT tokens are partially mutable, while Ethereum NFTs are completely immutable. This means that Solana NFT's metadata can be updated or modified after they have been created, while Ethereum NFTs cannot. This can be beneficial in certain use cases, such as creating NFTs that have dynamic enforceable royalties or compostability for upgrading without burning.
Another difference between Solana and Ethereum NFTs is their transaction speed and gas fees. Solana is known for its high transaction throughput, with the ability to process up to 65,000 transactions per second cheaply. This makes it an attractive platform for creating and trading NFTs that require high transaction volume. Ethereum, on the other hand, has a lower transaction throughput, which can result in higher gas fees and longer wait times for transactions to be processed.
Cardano allows for the creation of crypto tokens, including NFTs, without the need for a smart contract, as it is a built-in function of the blockchain. Unlike smart contract-based NFTs, where fees can be high due to network congestion, the base transaction fee on the Cardano blockchain is flat and applies to all simple transfers.
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