The boom of NFTs in the past few years has taken the world by storm. It has revolutionized how we look at the world of digital art and pictures. After its rapid success, many have tried to tide on the bandwagon of NFTs, to gain great profit. NFTs or the non-fungible tokens are digital images, art, pictures, iconic videos, etc.
These digital arts are stored (1) in the crypto blockchains. Storing them on the crypto blockchains allows individuals to have ownership of their content. Basically, you become the owner of the original content, and therefore you have the right to decide if you want to sell them to earn a profit or keep them as your own personal collectible.
NFT made its first appearance in the year 2017 (2). This was the year of Cryptopunks and Cryptokitties.
Cryptopunks: The History Maker
In 2017 Larva launched Cryptopunks, they created then thousand unique characters. These collectible characters were stored on the Ethereum Blockchain with evidence of ownership. Cryptopunks have now turned into an important part of cyber history. They are the earliest NFT project on the Ethereum blockchain.
Cryptopunks (3) soon inspired the Crypto Art (4) movement. The Crypto Art movement is all about the artist making digital art and distributing them through Crypto art galleries these are based on Ethereum blockchain technology. The Cryptopunks are considered to be the earliest example of Ethereum-based NFTs.
They inspired the ERC-721 standard (5), this, in turn, introduced a standard for NFTs, these tokens are unique, they have their own specific token Id, and the DApps have converters that use these unique token Id.
What is ERC-721?
The ERC-721 is the NFTs token standard, an API token is implemented through this standard within the smart contract. This standard facilitates functions like token transfer, you can also check the current balance of your token account. You can also use it to heck the total supply of tokens that are available on the network.
ERC abbreviation for Ethereum Request for Comment is to provide technical guidance to the developers for the construction. Cryptokitties used ERC-271 to create different kittens, and each kitten was unique therefore it could be sold at different prices in the market. The ERC-271 tokens are non-fungible therefore they are unique and cannot be replaced by others unlike bitcoins etc.
Their uniqueness makes them collectible as well as dictates different prices for each unique token.
Smart Contracts, What is it?
Smart Contracts were the founding blocks for Ethereum. These are computer programs that basically allow users to digitize the traditional contracts and then store them in blockchains and these contracts are executed automatically if the requirements are fulfilled.
The smart contracts are trustless and shot down the need for third-party intermediaries. These contracts can be used to track transfers, they can also perform many other functions.
It was as if Smart contracts are tailor-made for NFTs!
Cryptokitties: The Game Changer!
In November 2017, Dapper Labs launched their Ethereum-based blockchain game called Cryptokitties (6). This game was an earlier attempt to create a game for leisure and recreation, where the player can sell, buy, breed, and even collect virtual cats. The game is a major contributor to the popularity of the Ethereum blockchain network.
The game single-handedly promoted the Ethereum network so much that the network become overcrowded and it also experienced a network slow down due to overcrowding. The game still enjoys popularity, being one of the widely recognized blockchain games that were supported by Ethereum smart contracts (7).
Cryptokitties was responsible for attracting more than 14,000 active users and it basically amplified the Ethereum technology. The Cryptokitties as we are already aware is one of the earliest examples of NFTs, coded to ERC-721 standards of tokens.
Cryptokitties created history by introducing people to blockchain technology and showing them the potential and future benefits of using this technology. Cryptokitties is considered to be the leading figure in Ethereum-based NFT games (8).
NFT and Ethereum technology can successfully solve many problems that we face on the internet today, the question of ownership and control are very important factors. The decentralized blockchain technology allows us to have complete ownership over our content or creations.
Why Ethereum?
For NFTs, Ethereum has always been considered to be one of the most obvious choices (9). The fact that many NFT investors believe Ethereum to be a clear winner among others is proven correct by the domination of the Ethereum blockchain in the NFT market. it is not a small number either, 95 percent of the NFT marketplace is based on Ethereum Blockchain.
Ethereum's influence on the NFT markets (10) was obvious in terms of trading, buying, and selling.
The overwhelming presence of Ethereum-based NFT markets?
Ethereum is dictating the DeFi world. Therefore, the majority of the NFT projects are now running on Ethereum-based technology, they are based on the ERC-721 token standard.
The Reign of Ethereum...
If you are wondering why Ethereum is ruling the whole NFT market following are a few reasons that might help you understand this situation:
- Ethereum is a thoroughly secured (11) network, it is very secure because every transaction is backed by a large amount of computing, they verify and secure your every transaction in such a way that it becomes impossible for any kind of the third party to be able to interfere.
- The fundamental ideas behind these technologies contribute a lot to making them very secure for the users, these are open-source, decentralized, permissionless, etc.
- Ethereum’s Data architecture is such that it allows its users to create and store apps on blockchains and they even allow users to run smart contracts-based DApps.
- The Ethereum blockchain market gives NFTs great exposure to huge markets with high potential. One of the largest markets (12) for NFTs, called OpenSea is based on Ethereum technology. There are many such NFT markets for example SuperRare, Decentraland, Quik etc.
- The price of NFT Ethereum is no joke either, on average they are sold at a much higher price. NFTs are generally sold at a very high price, to the point people might call them ludicrous. Beeple sold his Everydays: The first 5000 Days (13) for $69.3 million, if this isn’t absurd, then what could be?
- Ethereum is one of the most acceptable cryptocurrencies to buy NFTs. As the NFT market is mostly dominated by Ethereum marketplaces, it becomes of utmost importance to have Ethereum crypto to be able to purchase NFTs.
- Since most of the NFT projects are based on the Ethereum Blockchain, the crypto wallets were made to facilitate compatibility between NFTs and EVM.
Reason for Compatibility
The EVM or the Ethereum Virtual Machine can handle millions of NFT projects that were being built on the Network by performing as a decentralized computer. At the beginning of NFTs Ethereum was the only network that could fully support NFTs.
The NFT creators at that time had to ensure that they create NFTs that would be compatible with Ethereum(14), so they had no other option but mint or create them on Ethereum. So, when NFTs became popular, they were all created compatible with Ethereum, and this led to it being the ruling platform in the NFT market.
The ERC-721 token standard ensures the demand for unique tokens, making them rare and distinct, therefore these tokens have a different value in comparison to other smart tokens.
To be honest, Ethereum is not the only way to create or sell NFTs, after the advent of Ethereum and NFTS. There was the rise of Ethereum killers that are attempting to dethrone Ethereum. There are many blockchains that can facilitate all these functions at cheaper rates, for example, Solana, Cardano, etc.
Its Persisting Popularity and Domination
Ethereum is considered the leader among the Blockchain networks (15). It was the second-largest blockchain technology, after bitcoin. It was the first second-generation cryptocurrency to enable smart contracts and decentralized applications. We can even call the Ethereum blockchain the progenitor of NFTs.
Ethereum is a major contributor to NFTs, and since Ethereum has been in the NFT market for a long time, and combining that with the matter of NFTs being quite compatible with Ethereum, it is no surprise that NFTs are sold for a much higher price. This is also the reason that many creators prefer the Ethereum-based marketplace to sell their creations.
Ethereum Leading the DeFi Market!
Ethereum has a highly-secured network and great data architecture. Because of these features, Ethereum is leading the DeFi market, with a large number of NFTs that are based on the ERC-721 token standard (16).
NFTs are very compatible with Ethereum markets like OpenSea, Rarible, SuperRare, etc. and therefore they are supported by Ethereum wallets like MetaMask. Since 95% percent of the NFT market is under the influence of Ethereum and them being sold at a high price in the markets, having Ethereum crypto in your wallet has become an absolute necessity.
If you wish to mint an NFT, then to be able to earn profit you have to sell it in NFT markets with high returns, Ethereum blockchain-based markets are a very good option. Although the cost of minting might be a bit high in comparison, the returns might be worth the risk.
Ethereum is one of the most trusted by people because of its history and reputation become one of the most obvious choices for NFT sellers and buyers (17).
Ethereum uses the proof of work, the usage of proof of work has led to more decentralization of the network, but it also poses the problem of less scalability. In comparison, there are many other networks out there that are trying to outdo Ethereum.
These 'Ethereum killers’ have proven themselves to be much cheaper and even better than Ethereum. The price of Ethereum is so high, that it has made many users look for other affordable options. Ethereum being the oldest and the most reliable is among few things that still attract users.
To resolve the issues of scalability that put Ethereum under the major threat of its competitor, Ethereum has planned to launch the ETH 2.0 (18). Hopefully, the next version will properly resolve these issues and save the position that Ethereum has been holding for a long time.
Why Ethereum and not Bitcoin?
If we consider the history, then Bitcoin is even older than Ethereum, therefore it must be even more reliable, then what could be the possible reason for the usage of Ethereum for NFTs and not Bitcoin?
The purpose of Ethereum is to make Itself a platform with smart contracts and decentralized applications. Bitcoin on the other hand was an attempt to establish itself as a new monetary system, that is based on peer-to-peer monitoring.
Functions like a smart contract can be used for assigning ownership as well as monitoring the transferability of the NFTs. These functions help in creating non-fungible NFTs. Bitcoin on the other hand cannot ensure the uniqueness of the NFTs, which is the feature that makes it different from other tokens (19).
Ethereum makes the transferability and the ownership of NFTs possible!
The Future…
The Future of Ethereum in the NFT market is under threat right now, with the presence of the ‘Ethereum killers’ and the high transaction fees, users have now started looking for other platforms. Ethereum is now facing many competitors in the NFT market, each trying to best Ethereum.
Day by day the absurd amount of gas fees for the transactions is making users frustrated, there have many people who have vocalized their opinion on this matter.
Ethereum to be honest is now lagging and is in urgent need of changes!
Its competitors are on its tail looking forward to stepping on it. In the midst of all this drama, Ethereum has announced the launch of ETH. 2.0, and promised that all the previous issues will be properly addressed and resolved in the new version. If it doesn’t cater to the user's demands then it might lose its position.
Right now, it is still one of the biggest NFT markets, followed closely by Solana, etc. Ethereum 2.0 is much anticipated by the crypto community. Because of its promises of resolving the issues of scalability, slow transaction, and gas fees, many are looking forward to positive changes.
The future is uncertain and we can only hope for the best!
