When someone hears the word non-fungible token (NFT), it usually conjures an image of an ERC-721 JPEG on OpenSea. However, that’s not the case. The intended use cases for NFTs were as complex as the technology itself. However, some of these use cases are still not imagined yet because the space is so new and underdeveloped. As more blockchains develop NFT standards, the myriad of use cases for NFTs will continue to grow.
Almost four years into the industry, there are a lot more choices than just Ethereum. While Ethereum has its benefits like the size of its community and its quality of developers, other Layer 1 protocols are also releasing their own version of an ERC-721 NFT token. Today we’ll talk about some of those L1 NFTs, as well as what makes the NFTs on each different L1 unique.
Two distinguishing features that this comes down to are speed and cost… eco-friendliness is also a point of consideration.
A Brief History of NFTs
Brought to life by EIP-721 token standard, NFTs first appeared in January 2018. Originally NFTs had the nickname deeds. One thing was clear. These tokens were designed to be distinct from their fungible ERC-20 counterpart. In other words, non-fungible ERC-721 tokens are different from ETH in the sense that NFTs are unique. On the other hand, ERC-20’s (ETH) can be swapped with another ETH and still have the same value.
Take an NFT like Bored Ape Yacht Club, for example. A single token from either collection is unique. Possessing Bored Ape #599 (Jimmy Fallon’s) is not the same as having Bored Ape Yacht Club #4652 or any other ape.
However, NFTs can represent much more than that. In Ethereum proposal EIP-721, NFTs were intended to be used for anything from physical property, to virtual collectibles, to negative value assets (loans, burdens, and other responsibilities).
While the Ethereum Foundation was the first mover of the space and the creator behind the product, it’s not the only NFT that’s out there.
Not All NFTs Are On Ethereum
In Q3 of 2021 alone, there were over $10B of NFT sales. That is only ¼ of the quarter revenue generated from iPhones but only in year three of the technology (Statista). However, not all of those sales came from Ethereum.
Since 2018 when NFTs were created, other blockchains have come online and an entire industry has formed. Layer 1 blockchains like Solana, Cardano, and Avalanche have all developed NFTs with their own standards. Of course, Ethereum was the first-mover so the next-generation of NFT tokens were able to improve on some of the design features since they had all of the extra time.
Gas is one of the most frequent complaints about Ethereum NFTs. To mint, purchase, or sell an NFT, you have to pay a gas fee for the transaction to be processed. The gas is essentially the fee paid to incentivize network validators to process Ethereum transactions. However, other blockchains don’t have as expensive of a gas fee (or congestion issue) as Ethereum does.
In addition to gas, there are a host of other features that differentiate one NFT to the next. Besides gas, other distinguishing features between different Layer 1 NFT platforms include:
- Processing time
- Size of the chain’s community and valuation
- Transferability of metadata
- Developers building on the network
NFTs on Other Layer 1 Protocols
Some of the main differences between Solana and Ethereum include speed and cost. While Ethereum can currently send 17 transactions per second, Solana can send up to 59,000. Cost is another factor. The average gas fee on Ethereum is over 5% of the total transaction, on average. Of course, this can get up to 20-30% when it comes to purchasing certain NFTs. Solana on the other hand charges $0.00025 for each transaction. Solana is already operating on a proof-of-stake consensus algorithm whereas Ethereum is not there yet.
In total, NFT sales on Cardano reached over half a billion dollars on the secondary market in the past quarter. What is even more mind blowing is that Solana isn’t even in the top three blockchains for NFTs by overall sales… just the top 5.
With the launch of the Alonzo hard fork, smart contracts are able to be called on the Cardano blockchain. That means NFTs can go full-on mainstream for Cardano. Before this, NFTs were able to be completed on Cardano but there were certain issues (for example, metadata was not able to be transferred via the blockchain before Alonzo). Now the Cardano community has fully functioning NFTs with low fees at $0.40 per transaction.
However, Cardano has not been able to have the level of growth that Solana, Ethereum or some of the other NFT platforms have experienced.
Avalanche is known for being low cost, fast, and eco-friendly. The subnet of the blockchain is capable of 4500 tps (compared to Ethereum’s current rate of 17), which makes it one of the fastest smart contract platforms in the industry. In the last year, Avalanche has quickly gained ground as a top 10 blockchain taking the industry by storm.
Can Other L1’s Out-Compete Ethereum
Some of the most significant advantages that Ethereum has built into include the network of developers and the community behind the project. Despite having exorbitantly high fees, Ethereum is still preferred by many entrepreneurs in the space due to how significant of a community it has.
Other Layer 1 blockchains beyond Ethereum are only starting to launch NFTs. It’s amazing that an industry this new is still able to generate $10B in Q3 of 2021. Ethereum was the first-mover and creator behind NFTs, and is still popular today despite high gas fees and a reputation for having a congested network. Other Layer 1 protocols like Avalanche, Cardano, and Solana are attempting to compete against it but they may have a hard time challenging the community over the technology.