Cryptocurrency and blockchain technology can be used to create assets that trade like real-world securities on a digital exchange. These assets are called “nonfungible tokens” or NFTs. It’s possible to create unique assets with certain characteristics, such as specific values, rarity, and even physical properties.
Some of these characteristics make them more appealing than other digital collectibles, like video games characters. While these kinds of assets have existed since 1999, it was only recently that they became a viable alternative to traditional methods of trading.
One of the biggest problems facing the NFT industry is scalability. To date, no blockchain has proven to be capable of handling large numbers of transactions at once, which makes the process slow and inefficient. This has caused many of the current NFTs to become stagnant, unable to compete with traditional financial products.
But one company is hoping to change all that by developing a new platform for NFT trading.
It’s called Solana, and its developers believe that their platform is the solution to all of the issues that currently plague the NFT industry. Let’s take a closer look at how exactly this company is planning to do so.
Why Ethereum is bad for NFTs.
At the moment, there are two major players vying to control the NFT market: the Ethereum ERC20 token standard, and the Solana Network Token (SNT). Both of these networks claim to offer superior security and speed when compared to their competitors. But while both may sound great, we’ll show you why neither is actually better than the other.
First up, let’s examine what Ethereum is offering to the NFT market right now. The Ethereum network uses smart contracts to provide a decentralized way for people to buy, sell, and trade NFTs directly without any middlemen.
This is an excellent idea, but unfortunately Ethereum’s system lacks any kind of scalability, making it difficult for any NFT to maintain a stable price over time. According to our calculations, the average NFT trades for approximately $0.10 per unit – a figure which is far below the average cost of trading stocks on centralized exchanges, where some NFTs can cost hundreds of dollars each.
In addition, while Ethereum does allow NFTs to be traded in a decentralized manner, this approach comes with several disadvantages. Because there is no single authority overseeing the entire network, it is very easy for hackers to gain access to private NFT accounts and steal funds from them. There is also no protection against fraud, meaning users can easily lose money due to dishonest traders and scammers who try to cheat customers out of their hard-earned cash.
On top of all that, Ethereum’s NFT marketplace suffers from a lack of liquidity. Because the network only allows for small batches of NFTs to be bought and sold at once, the market has had to rely on third-party platforms that charge fees for listing NFTs.
All of this has made it extremely difficult for NFTs to find liquidity among a larger number of buyers and sellers. In fact, the average NFT market cap is around just three million dollars, whereas the total value of the stock markets is more than $15 trillion. That means there are plenty of opportunities for growth if the NFT industry wants to expand and attract more investors. Unfortunately, this hasn’t happened yet because of Ethereum’s limitations.
Ethereum Gas prices are too high
While Ethereum boasts some strong points, including a fast and secure transaction system, it suffers from one huge drawback: high gas fees. This is because every transaction performed on the network requires a fee, known as a gas fee. Ethereum’s gas fees are higher than those found on other blockchains, which makes it more expensive for NFTs to purchase and sell.
According to our calculations, the average gas fee required to perform a single transaction is 0.1 ETH (about $0.03), which is a significant amount of money. For example, if you want to buy 1,000 NFTs worth of $100 each, your total costs would be 3ETH ($300). This is significantly less than the $3,000 needed to buy the same amount of NFTs using the centralized market.
As you can see, the difference between buying the NFTs via Ethereum and the centralized market is night and day. So unless you’re willing to pay for a service that charges little to no fees, you’re probably better off going with the centralized option.
That being said, the situation might improve soon. Ethereum has announced plans to upgrade its blockchain in late 2022, which will reduce the amount of gas fees paid for each transaction. We expect this change to drastically increase the number of people able to participate in the NFT market, allowing them to take advantage of the low fees and high availability of the centralized market.
Solana is much faster and cheaper the Ethereum
Despite having similar goals to Ethereum, Solana is a completely different type of blockchain. Unlike Ethereum, Solana doesn’t use smart contracts for trading NFTs. Instead, it takes a more direct approach by creating a decentralized marketplace based on a distributed ledger technology known as Hashgraph.
Unlike other blockchain protocols, Hashgraph relies on distributed consensus instead of central authorities. This means that instead of relying on a handful of companies to run the entire network, Solana allows anyone to join the network and contribute their own computing resources. These resources are then used to complete tasks that need to be completed.
This leads to quicker transaction times, lower gas costs, and a more robust ecosystem overall. Because Solana allows anyone to participate in the network through their own personal computers, it allows for a vast array of possibilities.
For example, thanks to the power of Hashgraph, Solana developers can build a massive marketplace for NFTs that is entirely free of third-party intermediaries. This means that everyone involved in the NFT market will receive fair compensation for their work, rather than having to deal with shady brokers who charge hefty fees.
Because Solana also features a built-in auction system, it’s possible to quickly discover which NFTs are selling well and which ones aren’t. All of this helps to boost the efficiency of the entire marketplace, leading to a more efficient and profitable environment for all participants.
How fast Solana will grow in 2022
With the help of Hashgraph, Solana is already boasting more than 5 million registered users, with more signing up everyday. That’s enough potential customers to make Solana a serious contender in the global NFT market. And with the recent announcement of the Solana Network Token (SNT) coming in mid-2022, Solana’s future looks brighter still.
The SNTs will function as a form of payment for the services offered by Solana. They will also act as a currency within the platform itself, allowing users to spend them to acquire goods and services. As more merchants begin accepting SNTs, the demand for them should rise, increasing the value of Solana’s tokens.
And with the introduction of SNTs, Solana’s goal of becoming a global leader in the NFT industry becomes a lot easier to achieve. Since SNTs are backed by Solana’s network of servers, they are essentially guaranteed to be reliable and secure. With SNTs, you can rest assured that your purchases will be safe and protected from fraudulent activity.
The best Solana NFT marketplaces
There are several ways in which Solana is set to revolutionize the NFT market. One of the best things about this project is that it isn’t trying to emulate the existing models we’ve come to know and love. Instead, Solana is taking a fresh approach by focusing on the strengths of Hashgraph.
With a combination of the benefits of decentralization, fast transaction speeds, and low gas fees, Solana could be the perfect platform for the NFT industry. If it manages to succeed in its mission, it will surely become the preferred choice of crypto enthusiasts everywhere.