By Sergey Vartanov Khachaturyan
In the ever-evolving landscape of on-chain culture, NFTs have led the segment as a cornerstone of digital ownership, scarcity and monetisation of IP. However, as the NFT market expanded, scalability and cost-efficiency issues became apparent, particularly on Ethereum's network with high gas prices.
The surge in popularity of NFTs highlighted the need for enhanced scalability and interoperability. Enter compressed NFTs [cNFTs], a new alternative solution pioneered on the Solana blockchain, offering a path to address these challenges.
This piece delves into the inception, impact, and future prospects of compressed NFTs [cNFTs], marking a new paradigm in the scalability and accessibility of NFTs for creators, collectors, and consumers alike.
The journey of NFTs to their current state has been a testament to crypto’s impact on digital ownership and art. Originating on Ethereum, the early NFT projects like CryptoKitties not only showcased blockchain's potential for creating unique digital assets but also exposed its limitations.
CryptoKitties
Ethereum's scalability issues became evident as the popularity of NFTs surged, leading to network congestion and prohibitive transaction fees, particularly during market peaks. For instance, during the 2017 CryptoKitties craze, the Ethereum network experienced unprecedented congestion, significantly increasing gas prices and transaction times on the chain.
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The CryptoKitties craze highlighted the need for scalable solutions capable of supporting the growing demand for NFTs without compromising on cost or efficiency. The scalability challenge prompted the exploration of using alternative networks like Polygon, Solana and various L2s on Ethereum, which promised higher transaction throughput and lower costs, setting the stage for innovations like compressed NFTs [cNFTs].
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In response to scalability challenges, Solana emerged as a potential game-changer for the NFT ecosystem. With its innovative Proof of History [PoH] consensus algorithm combined with Proof of Stake [PoS], Solana offers a high-throughput, low-latency platform that significantly reduces transaction costs and speeds compared with Ethereum.
Solana’s Proof of History
This different technical approach made Solana an attractive alternative for NFT projects seeking scalability and efficiency. One example of Solana's impact is the launch of Degenerate Ape Academy in August 2021, which saw a rapid sell-out of 10,000 NFTs in just 8 minutes, showcasing Solana's capacity to handle high-volume transactions seamlessly.
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Solana's entry into the NFT space has not only provided a different solution to Ethereum's congestion and high fees but also expanded the possibilities for NFT innovation, paving the way for the development of compressed NFTs. These cNFTs further capitalise on Solana's strengths, offering a scalable and cost-effective approach to NFT creation and management, and represent a significant milestone in the evolution of the NFT marketplace.
Compressed NFTs [cNFTs] leverage advanced data compression techniques to address scalability and efficiency within the blockchain.