Interoperability: Smart contracts vs. Platforms
The blockchain landscape deals with interoperability issues daily. Whether exchanging cryptocurrencies from one blockchain to another, selling NFTs from one marketplace to another, or simply file-sharing from one dApp to another, interoperability is the next frontier for Web3 to take flight. And NFT royalty setting is a ticker for the future of the decentralized creator economy.
TL;DR:
- The blockchain landscape deals with interoperability issues daily.
- DeFi projects come with a trade-off from traditional finance– costs, security, decentralization, and scalability.
- So long as the smart contract of the NFTs is compatible amongst different platforms, there shouldn’t be an issue. But the real problem is when NFTs are transferred from one place to another, ceasing the validity of their smart contract.
DeFi projects come with a trade-off from traditional finance– costs, security, decentralization, and scalability. And this last trait, scalability, carries the burden of answering the popularized concern for interoperability amongst different chains. Think tasks like moving your NFT from one marketplace to another or minting NFTs on one chain and selling them on another.
But for DeFi projects to achieve interoperability and enable seamless interactions amongst different blockchains, they need to work with trusted third parties (oracles or exchanges) or create solutions. And sure enough, the decentralized ecosystem has spawned several interoperable solutions and concepts –relays, rollups, notary schemes, and Blockchains of Blockchains (BoB), among others.
One of the most recent questions behind interoperability is royalty setting. If users could mint their NFTs and carry them seamlessly from one NFT marketplace to another–from one chain to another– you’d expect the NFT ecosystem to have exploded by now. But the quest to find how blockchains could transfer assets and information among each other is still in vogue.
Since NFTs were on the breakout in 2020–2021, one of the most discussed traits of the NFT ecosystem was its potential for royalty setting within their smart contract. Should all the users of the NFT boom –NFTs, marketplaces, NFT communities, crypto creatives, NFT creators, NFT collectors– be siloed to a single native platform?
Let’s have a look at Ethereum
The crypto ecosystem is under construction by an army of collaborating developers shaping the industry as best as the Ethereum community deems necessary. That’s how the NFT landscape leverages all the updates and implementations made to the Ethereum ecosystem on a proposal/improvement basis.
Do “ERC” and “EIP” sound familiar? EIPs are improvement proposals that Ethereum community developers can further develop into ERCs or standards. ERC standards are implemented and updated throughout all Ethereum-based elements. Think of it as a collaborative improvement center to tweak Ethereum-related aspects.
In terms of royalties, EIP-2981 is the current favorite. It’s the most popular EIP for royalties among many NFT platforms (not all of them). Why? It’s compatible with NFT standards, ERC-1155 and ERC-721 (Multi Token standard and Non Fungible token standard)
The catch is that the smart contracts for these tokens don’t understand the concept of transaction per se; they’re programmed to deploy preset conditions. There’s no way for the smart contract itself to determine whether or not the transfer is, in fact, a sale or not. And that’s pretty much the issue; without an NFT royalty standard in place, most NFT royalties are subject to the conditions established by NFT marketplaces where they reside or worse, siloed to where they get minted.
So, where does that leave NFTs? For now, interoperability amongst platforms is pretty much the more significant issue. So long as the smart contract of the NFTs is compatible amongst different platforms, there shouldn’t be an issue. But the real problem is when NFTs are transferred from one place to another, ceasing the validity of their smart contract. Because each one is adept at a different blockchain, a different smart contract, and a different community royalty setting or paybacks are a matter of whether or not the internet of value can hold its promise for the future: seamless interoperability within a blockchain agnostic ecosystem.
Conclusions
Given that interoperability is a matter of platform compatibility rather than smart contract setting –be that for royalties or not– web3 now faces the challenge of shifting from internet protocol societies to the inter-ledger protocol world. And if one could assume there´s a shared vision to bring absolute decentralization to all blockchain projects, it would require most, if not all, projects to be blockchain agnostic. Hopefully, some won’t be more “agnostic” than others.
About THEOS: The THEOS ecosystem is managed and sustained by our Association, a traditional finance, and blockchain virtuosos team. We envision a new way of thinking, minting, and trading NFTs, and have developed what we believe will become the next-generation community-governed NFT platform.
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