The current market for NFTs might be small compared to the DeFi market, but recently there has been rapid growth in the NFT ecosystem. With constant news about NFT prices hitting record numbers, it’s hard to not pay more attention to NFTs. What are these NFT art, music, NBA player cards, and video game loot boxes that people keep talking about? And what are these ERC-721, ERC-1155, BEP-721, BEP-1155 standards and FLOW protocols that are mentioned? What are the different types of NFTs available? Let’s further discuss these ideas below.
As mentioned in our What is NFT? article, NFTs can represent anything that is indivisible. If we combine this characteristic with blockchain’s immutable nature, it becomes a perfect fit to represent limited or sole ownership of items like artwork, music, and more.
All blockchains share the characteristic that they are immutable. However, different blockchains can offer other distinct characteristics. The most well-known blockchain that supports and issues NFTs is Ethereum (ETH). One can say that it is one of the public blockchains most comparable with Bitcoin in terms of popularity. Due to Ethereum’s Smart Contract feature, the first ever NFT, CryptoKitties, was born on Ethereum. In fact, the concept and standard for NFTs were put forward by the team behind CryptoKitties. Users choose to perform NFT transactions on Ethereum not only because of features that Smart Contracts can provide, but also because of the vast amount of nodes in the Ethereum network. The more nodes a network has, the more secure and stable it will be, which means the less likely that any record of NFTs issued on Ethereum will disappear.
For most NFTs issued on Ethereum, they usually follow the ERC-721 or ERC-1155 Standard. The ERC-721 Standard emphasizes the uniqueness of each token, each token is one-of-a-kind. On the other hand, ERC-1155 divides a single NFT into multiple parts. For example: If an artwork is very expensive, it can be hard for one single person to place the highest bid at an auction, so a group of friends might pool their funds together. In the end, who owns the NFT? ERC-1155 solves this by issuing multiple NFTs at once, each of which represents a partial ownership of the artwork. Another comparison between the two standards could be loot boxes in video games: ERC-721 can be used to issue a single, unique loot box in the entire server, while ERC-1155 can be used to issue multiple instances of the same loot box.
Because of the availability of a wide range of standards, Ethereum has covered almost all bases when it comes to NFT. But because Ethereum has become such a powerful tool, it has also caused Ether’s price to soar. All transactions that take place on Ethereum, including issuing, burning, re-issuance, and transfers, carry transaction fees paid in Ether. High transaction fees on Ethereum has brought about the rise of other blockchains with smart contract features. One of the most notable blockchains to arise is (Binance Smart Chain)[https://www.cybavo.com/glossary/binance-smart-chain/] (BSC).
BSC was developed by the world’s biggest cryptocurrency exchange, Binance. With smart contract features compatible with Ethereum and low transaction fees, it has become a major player in the NFT market. The BEP-721 and BEP-1155 standards issued on the BSC are identical in function and features to the ERC-721 and ERC-1155 standards. The biggest difference is the transaction fee: transaction fees on BSC are less than 10% than those on Ethereum. Binance also has a dedicated team to assist those who want to issue NFTs on the BSC, which has helped the rapid growth in Binance’s NFT market share.
FLOW, a public blockchain developed by NFT pioneers CryptoKitties, has also launched recently. With their expertise on NFTs, they even developed an NFT standard that allows for users to delegate their stakes to professional operators. This way, beginners can perform transactions without being burdened by transaction fees. The team behind FLOW understood that there must be an attractive IP to support its NFT ecosystem. To achieve this, they acquired the rights to issue NBA Top Shot NFTs. With the backing of a powerful IP and a complete and well-rounded public blockchain, FLOW is also one of the top contenders for creators when it comes choosing an NFT network.
Whether you are a buyer or a creator looking to issue an NFT, there’s more to understand than just the NFT item you’re buying or selling. You also need to understand the standard, protocol, and blockchain that the NFT uses. This will affect the NFT and its value in the future.
Now that you understand NFT protocols you may be asking: Do I buy NFTs on cryptocurrency exchanges? After I buy them, will I see them in my wallet? How do I find the NFT I’m looking for? We will answer these questions related to NFT trading in our Knowledge Center, so stay tuned!
Learn more about blockchain and cryptocurrencies in our Knowledge Center。