Non-fungible tokens are creating a new paradigm across every sector and industry. From finance to the entertainment world such as video games. These digital assets are causing a huge transformation that does not appear to slow down any time soon.

Through the creation of digital artwork,  traders, entrepreneurs, digital artists and developers have received investment opportunities. 

But, in order to understand better NFTs it is necessary to know the NFT protocols which we are going to explore in more detail in this article.

What is a nft protocol?

All blockchains share a characteristic in common – they are all immutable. However, they also have their own features. This is why, if you’re a buyer or a creator looking to issue an NFT, you must consider what type of protocols they are, their NFT and token standards and the blockchain in which they are based.

But, what is a NFT protocol?  It is the underlying software of the Blockchain on which NFT projects are created, held and traded. Most of the NFTs or Non-fungible tokens are part of the Ethereum Blockchain. Although there are also other blockchains that created their own version of NFTs, we are going to explore these NFT protocols in the following sections. 

How it works?

Just like traditional money, cryptocurrencies are used to make transactions in the blockchain. These digital coins can be converted into fiat currencies through cryptocurrency exchanges. But, NFTs differ from crypto as they are a unique and irreplaceable digital asset that can only be traded using cryptocurrencies. It can gain or lose value depending on the currency used to make the purchase. These NFTs are bought and sold in NFT marketplaces using blockchain technology.

It must be noticed that blockchains are essentially networks of interconnected nodes. These nodes validate transactions and “mint” new tokens in order to  reward users’ efforts. The addition of a node increases the performance and capacity of the protocol, to support more token transactions and increase the activity of software developers.

It could be seen as a simple network effect. However, it is more complicated than it sounds. This is because the addition of new nodes does not increase the value of the protocol for the other nodes that are already working on the network. In fact, it occurs quite the opposite. This network reduces other nodes’ value, since there is an increasing competition to validate transactions and create new NFTs and tokens.

But, the addition of more nodes when Proof of Stake (PoS) is implemented will lead to more people purchasing cryptocurrencies. In consequence, nodes will charge better when they validate transactions. It is a cross-network effect between a two-sided interaction network where cryptocurrency buyers can also be validators and vice versa.

However, Ethereum and other crypto protocols face the risk of network congestion quite often. This means that if there is high activity, it can overwhelm the protocol’s capacity. This could cause  higher-than-usual gas fees and processing times.

Now,  let’s explore the different NFT protocols that exist.

TOP 3 NFT protocols to develop NFT

If you are considering using a protocol to develop your NFTs, these are the top 3 you can take into account:Ehereum, Polygon and Solana.

TOP 1: Ethereum

The majority of NFTs are part of Ethereum because NFTs were born in this blockchain. Nowadays, it accounts for a total of 80,300 NFT collections. This blockchain leads the decentralized finance market, also known as DeFi. In Ethereum, Ether (ETH) is used as currency and NFT projects are running on ERC-721 coins. 

Some popular NFT projects made on this blockchain are the play-to-earn game Axie Infinity, Bored Ape Yacht Club (the NFT choice of celebrities) and NBA TopShot for those NBA fans that want to trade NBA moments as NFTs. 

Even though this is the most popular and used platform, as explained before, it is this same congestion that has made NFT creators to consider alternatives because of the high transaction fees involved. 

TOP 2: Polygon

Polygon, formerly known as Matic Network,  has established itself as a robust and effective alternative for Ethereum. It works as a secondary layer that runs on top of Ethereum and it offers a scaling solution reducing gas fees and speed of transactions. This is why more and more NFT projects are built on this protocol. 

Some popular NFT projects to stand out are The Martians Metaverse, Chumbi Valley Official and TheMaticGreys. 

TOP 3: Solana

Solana is relatively new compared to Ethereum but its lower costs and versatility is gaining more popularity in the NFT marketplace. It uses a consensus mechanism called Proof-of-History that leverages a set of protocols to execute transactions faster –  more than 60,000 transactions per second. As it is a secondary market, it is cheap, fast and easy to profit from. 

Some NFT projects made through Solana are Origin Wars NFT, Squid Academy and Chainers. 

In G4AL we run our games in the Ethereum network using the second layer Polygon to increase the power and safety of our video games. ¿Interested to pay while earning money? Check out our video games and sign up to get the latest updates.