Compression On Solana, How it is a game changer for NFT Scalability
- What is a Compressed NFT?
- Why are compressed NFTs Only Possible on Solana
- Current Products Utilizing Compressed NFTs & Avenues of Growth
- Bridging web2.5 to web3
Onboarding web2 users is Web3’s biggest sunk cost fallacy. We have seen in the past where web2 brands would enter the web3 space with collections at a smaller scale, with ranges from 1000–10,000. To then be unable to scale the core product to onboard more users onto the brand, then end up abandoning the project or simply not actively working on it. However, Web3 Natives will continue to try onboard these web2 companies while paying the price. In layman’s terms, to make scaleable products for web2, we also need a cost-effective infrastructure; introducing State compression.
What is a Compressed NFT?
On April 6, 2023, Solana Foundation released articles introducing state compression and compressed NFTs. Jon Wong, a technical lead over at the Solana Foundation describes it as, “a new way to store data directly on-chain that cuts down on cost by magnitudes of scale.”. This new way? By Introducing Merkle Trees. A Merkle tree, also known as a hash tree, is used to efficiently verify the integrity and consistency of large databases.
To break down the concept of a Merkle tree, let me offer an example:
Imagine you are out for dinner and you ask for the check, and in return, you give your card. After the transaction has been processed, you have 2 receipts given to you, the receipt to sign and one to keep (usually the customer receipt). After you sign, you go on your way, putting the receipt in your pocket. The next week, your bank statements come in the mail and you see a transaction that you are unfamiliar with. You contemplate (and sometimes curse), “How did I spend that much?? “, to then reach into your pocket with a crumbled-up receipt that’s been in the wash, from the same place you went the week before. Now confirming that you did in fact spend that much, you wouldn’t need to give your bank a call to report fraudulent charges on your card.
To step it up a notch, Wong proceeds to break down the 5 key things to know when getting started with compressed NFTs. The 5 key things Wong mentions are, “Understand Merkle trees, Initialize the tree, Mint an NFT, Use an RPC to get the latest data, Use proofs to transfer NFTs”. Let’s tackle the first part, understanding Merkle Trees again, to solidify the metaphor I mentioned previously. Fundamentally, Merkle trees can compress large amounts of data into a hash within the tree. The “roots’ is where the data is stored. While at the same time, these roots are stored on-chain and updates are directly put within Solana’s Ledger. Now anyone can find, reconstruct, and verify the tree with low costs thanks to Solana Layer 1 Infrastructure. The rest of the key things can be broken down at a higher level at (https://solana.com/news/how-to-use-compressed-nfts-on-solana?ref=solana.ghost.io).
To tie it all up in a nice bow, compression NFTs, are able to create a cost-effective scalable model for NFTs and Brands on Solana. Where everyone can get access to its base Merkle tree to verify and store NFTs on the chain for a cheap price.
Why are compressed NFTs Only Possible on Solana?
With the knowledge of this innovation, people wonder why isn’t compression available on other chains. Since replication usually follows the creation, let’s dive into why It can’t be replicated currently on other Layer 1s. Notably a Layer 1 we all know, Ethereum, isn’t able to replicate the NFT compression simply because it cannot scale to that level. Yes, Ethereum does use Merkle tree concepts within State Trie, Transaction Merkle Tree, Merkle Patricia tree (MPT), and Merkle proofs. However, the cost of creating a Merkle tree to mint NFTs is too high. When creating a Merkle tree on ETH, the cost is dependent on gas fees, transaction size, and storage costs. Meaning you have to pay for the creation and updating of the tree through the gas. The more nodes and layers in the Merkle tree, the larger the transaction = the higher the gas costs. While also then storage costs will be the final factor. Instead to mitigate costs and improve scalability, Layer 2 Solutions, such as optimistic rollups and ZK rollups. I am not denying that it is possible to emulate it within ETH or ETH Layer 2s. However, to do so would be an inefficient use of resources and is not a viable solution for scalability.
Current Products Utilizing Compressed NFTs & Avenues of Growth
compression NFT opens the avenue for advertisement, coupons, and newsletters for traditional media and brands to utilize on-chain. While also opening the avenue for native Solana projects to utilize in the form of trials for their dApp products and for gaming NFTs as well. To dive in, let’s explore projects who do utilize compression.
Drip.Haus
Drip.Haus is a platform where users who are invited to the platform, are able to get free digital collectibles every week. Coining the term, “Content is now collectible.”, Drip really shows off their passion for Solana and Content creators. With collab pieces from independent music artists, to 1/1 art creators, and even NFT projects. Their thesis for sending free collectibles every week? To change the narrative from, “Turing YOUR time into THEIR money.”, to “now YOU own your own attention. It’s your asset to keep, or monetize” (https://twitter.com/drip_haus/status/1660028814246973441). An avenue of growth Drip has recently done was allowing creators to be tipped by the community for the collectibles they created for Drip. An artist named Degen Poet, who specializes in pieces created by a typewriter and creates animation with some of his pieces, was one of the first creators to test this system.
Gamification and exclusive event drops should be also considered by the Drip team. As xNFTs become more developed, it would be interesting to see a slider puzzle attached to the compressed NFTs, and once solving a puzzle within a certain time frame can distinguish what rarity the piece will distribute to the solver of the puzzle. Instead of air-dropping these NFTs, the drip team can make it an extension of their current website, next to their “Legendary Lock-in feature”- where users can go daily to try to win an epic or legendary NFT. For exclusive event drops, allowing users to claim exclusive NFTs for participating in Hackathons, Hacker Houses, Crypto conferences, and the Breakpoint conference. By doing so you are able to reward those who are active within the ecosystem, while also giving them a memento of the event they attended. Overall Drip has onboarded many users to its platform, has been consistent with its branding, and has been releasing amazing art by amazing creators.
Underdog Protocol/API
At the beginning of the year, Solana hosted the Grizzlython Hackathon, and its grand champion was- Underdog Protocol. Underdog’s main value prop is “makes it seamless to integrate Dynamic NFTs into any product or workflow. It becomes a streamlined process to create NFTs, maintain them and track data through multiple different avenues of platforms. A common theme they used was web2 in the front, and web3 in the back and the product makes the back of web3 easier to use. Examples include Defi protocols minting early adopter NFTs when user trade, social protocol minting soulbond rewards with API, and nft projects like boo ventures capturing discord engagement on an nft. Their dashboard allows you to manage your nft projects, generate an API key, and access developer tooling. “We’ve created a Mintoor, updatooor, and a indexoooor 3 separate products all in 1”. They want developers to streamline to then focus on their product experience. Their NFTS become the data standard, to bridge data stuck in web2 silos and make their NFTs interlope products.
In their demo, the team discusses mailchimp and nontransferable NFTs, and how seamless it is to get a NFT to the consumer’s hand. There are a couple of avenues of growth for this sort of product. Affiliate marketing would be a great market for the team to explore. Where the usual pipeline is for users to create their own code to then refer other consumers with their code. With this tech, Content creators can customize their fan’s experience by giving their fans a digital collectible every time they use their code at checkout.
Bridging Web2.5 to Web3
During the peak of the bull, the narrative of Web3 was not cemented correctly and had unreliable foundations for making it relevant outside of the bull market. Where the term Metaverse helped give Web3 its popularity during the pandemic; it also became its downfall for Web3. When the bear market appeared, the narrative shifted, from Web3 to Web2.5. Web2.5 is the word to describe businesses that live between Web2 and Web3, usually with Web2 front end and Web3. Where we see businesses like Reddit adopt blockchain tech into their app through Reddit avatars. However, with compression and infrastructure like Underdog API being created, we can start a shift to see more Web3-centered Products being used.
Conclusion
In conclusion, the introduction of compressed NFTs on Solana has emerged as a game-changer for NFT scalability, leveraging the power of Merkle trees to revolutionize data storage and verification on the blockchain. This groundbreaking innovation, unique to Solana, addresses the limitations of other chains like Ethereum, which struggle with scalability and exorbitant gas fees. By compressing large amounts of data into compact hashes stored on Solana’s ledger, compressed NFTs offer a cost-effective and scalable model for NFTs and brands.
Sources Used
https://solana.com/news/solana-grizzlython-winners
https://dune.com/polygon_analytics/reddit-collectible-avatars