Blockchain Infrastructures Should Solve The Risks Faced by Digital Collectibles
- Cross-chain is the future of the NFT industry.
- A complex NFT protocol is needed for smooth use and trade of NFTs.
- Only data-oriented solutions can solve the NFT evaluation issue.
The first quarter of 2022 is coming to its end, yet it feels like we’ve only just waved goodbye to 2021, a remarkable year indeed for the entire crypto industry. In retrospect, what strikes you as the yearly in-word? Well, Collins Dictionary has given out its answer by naming NFT (non-fungible token) the Word of the Year 2021.
Cheering for the massive NFT boom, the blockchain industry was genuinely taking a huge step towards mass adoption. To keep up the momentum, we might as well spare some attention to the underlying technical development of the industry and its road ahead.
NFT Path Started Years Ago
In May, 2014, the first-ever NFT “Quantum” was created and sold by Kevin McCoy using a technology referred to as “monetized graphics”, through which a non-fungible tradable blockchain marker was linked to the artwork via on-chain metadata.
Digital collectibles have actually been around since 2014, but it was not until last year that they exploded in popularity. According to data from DappRadar, the cumulative NFT trading volume surpassed $23 billion in 2021, and the estimated floor market cap for the top 100 NFT collections reached $16.7 billion.
Eight years after the $4 worth deal was made, the one of a kind “Quantum” art piece is now for sale for $7 million or more. A drastic change indeed. Yet, this is not the only change that has happened to NFTs over the years.
NFTs Expand Their Use
The first digital collectible was invented out of a will to enable artists to support and protect their creations with the help of blockchain technology. An NFT, as a cryptographically unique digital asset, represents the ownership of digital or physical content such as artwork, music, and video clips. A blockchain can serve as an indelible ledger recording all digital transactions and proving authenticity and ownership.
Ever since this initial attempt, more NFT usage scenarios have been constantly emerging.
In October 2015, the project Etheria was launched, in a virtual open world of which a total supply of 457 hexagonal tiles could be traded and built on as NFTs. This was the first NFT project on Ethereum with a transfer function, which was a huge step to the NFTs we are familiar with nowadays. More NFT collections like CryptoPunks and EtherRock came to Ethereum two years later and contributed to the NFT craze in 2021.
In 2017, the Ethereum-based blockchain game CryptoKitties brought public attention to NFTs. In this game, each CryptoKitty is a unique NFT for players to buy, collect, breed, and sell. The game soon went viral and even caused congestion in the Ethereum network. A similar NFT-based online game Axie Infinity came out later in 2018 and has been leading the way as the most popular Play-to-Earn blockchain game to this day.
DeFi / Finance
In addition to representing digital arts and in-game assets, NFTs also serve to bring financial benefits through their utility in decentralized finance (DeFi). NFT holders get to earn passive income by staking NFTs in DeFi platforms with no need to sell their collections. Meanwhile, there has been a recent trend where celebrities and brands come to embrace the wave of NFTs, providing more utility paradigms in the NFT space.
Challenges of the NFT Industry
However, along with the increasingly abundant usage scenarios of NFTs, problems arise. These problems need to be solved before the mass adoption of NFTs truly comes.
To begin with, most NFTs simply have hyperlinks to the digital assets they outline, posing risks of losing assets in case the digital asset is destroyed or the hosting server crashes or goes offline.
Also, there are considerable fluctuations in NFT prices as there is no fixed standard for any particular type of NFT, hence the difficulty for evaluation.
Let alone the fact that a great number of NFTs created are plagiarized works, fake collections, and spam.
Ethereum Network Congestion
As you probably have already noticed, the popular NFT collectables and blockchain games mentioned above are all Ethereum-based, and the E-list just goes longer, which led to a series of problems.
We already knew what happened with CryptoKitties in 2017 as it congested the Ethereum network with increasing pending transactions due to its explosive popularity.
By 2021, the industry’s TVL (total value locked) had increased to over $200 billion. Ethereum was holding nearly 60% of it, yet with its mere 12–15 TPS (transactions per second) limit.
An Ethereum transaction now takes 13 seconds on average, but it can still take days depending on network congestion and gas fees being paid.
Questions to think about still include how to confirm the high frequency transactions there with speed and how to lower the gas fee as it is already unaffordable for many with the current ETH price.
Actions have actually been taken in response, as more public chains like BNB chain, Solana, and Avalanche have made Ethereum no longer dominant and marketplace sites like OpenSea and RareBits were created to facilitate NFT trading as well.
Yet, NFTs being on different chains won’t allow shared scalability, security, and messaging, hence a new challenge has come as to how to realize secure and fast NFT cross-chain between different ecosystems.
Where To Next?
These obstacles must be overcome to make the NFT industry continuously thrive and truly connected to the life of the masses.
It is to Rangers Protocol’s belief that cross-chain is the future of the NFT industry. With each of the multiple chains being different with their specialty in technology, users get to choose from them based on their specific needs and goals. There will be gaps in between for sure, and that is what the industry should work on to solve by realizing functional cross-chain interoperability.
An NFT protocol that can integrate major NFT protocols standards and unify NFT assets into consistent data structure would greatly help with the smooth use and trade of NFTs. A more powerful solution that supports high TPS and fast transaction confirmation is also necessary for NFT and even complicated applications.
Evaluation of NFTs
As for a sound evaluation of NFTs, the retention of all coherent historical data and cross-chain data is indispensable, since each NFT is unique and only data-oriented solutions that include on-chain and off-chain data track for comprehensive dimensions can solve the evaluation issue.
NFT Is Primed for Big Things
The NFT industry will be full of opportunities and challenges in the future. Rangers Protocol has risen to the challenges by providing solutions of NFT cross-chain, accessibility, and more to endow the masses with their own opportunities to create, to earn, and to have fun in the NFT world.
About Rangers Protocol
Rangers Protocol is a Metaverse blockchain infrastructure. It is a high-performance engine for complex development and data migration. Rangers Protocol is fully compatible with Ethereum, professionally supports NFT and complex applications, and integrates and expands cross-chain, NFT, EVM, and distributed network protocols.