What is NFT and Why is it Popular
There is global hype around Non-Fungible Token (NFT). The most expensive NFT so far — Everydays: the First 5000 Days was traded at US$69.3million!!!
To understand what’s NFT, you can take a look of an excellent explanation here.
The concept can be elaborated by the example of digital artwork. The artwork creator can tokenize his artwork (using author name, creation date/time, image file, etc as info) and put it on the blockchain. He/She can then send the token (NFT) to the buyer once money is received. The buyer can prove the ownership of the artwork by the procession of the token in his/her wallet. All info and transactions occurred (traceable & undeniable) are recorded on the blockchain that everybody can check. This can solve the problem of digital artwork ownership that’s impossible to implement in the past.
Ownership of artwork is just the tip of the iceberg of NFT application. There are endless use cases of NFT which make it a killer application of the blockchain technology.
Pain Points of NFT on Ethereum
For now, most of the NFT are minted on the Ethereum platform. This is due to the fact that Ethereum is the most popular and mature blockchain platform in the market. But minting NFT on Ethereum is facing a big issue now — the cost. As you may know, any activity on the blockchain network comes with a cost. That’s no exception for minting NFT. Minting NFT is considered as a transaction performed on Ethereum. And to have this happen, we have to pay the transaction fee (GAS fee in other words). Unfortunately, due to the Ethereum’s design, it depends on the size of the transaction as well as the price of Eth. Due to the recent urge of Eth price (close to US$2,500 at the time of writing), the cost of minting a NFT on Ethereum can be very scary.
We can take a look of the “Everydays: the First 5000 Days” token on Etherscan.
We can see that the transaction fee is 0.018904028 Ether. Assuming 1ETH=US$2,500, the transaction fee amounts to US$47.26.
While this is negligible for a NFT that worths US$69.3million, it is considered very expensive for most artwork. Image if you want to sell your artwork at US$10, the NFT is almost 5 times more expensive that the price of the artwork itself!!! This is a show stopper for mass adoption of NFT.
Cardano Comes to the Rescue
With the launch of Mary hard fork on 1 Mar 21, we can mint tokens on Cardano blockchain now. It takes a different approach from Ethereum for minting tokens in the way that no smart contract is needed. Instead, it treats token accounting as Ada (Cardano’s own native token) does.
If you want to know more about minting tokens on Cardano, please refer to my previous article.
In general, non-fungible token is the same as fungible token with the restriction that it can be minted only ONCE. So, we can mint non-fungible token the same way as fungible token, but with the following extra conditions:
- Specify minting policy
- we have to specify that the same token can’t be minted after certain timeslot
- more specifically, we have to include the “RequireTimeBefore” parameter in the Multi-signature script. Detail info can be found here.
2. Include token’s metadata in the transaction
- we have to include metadata in the minting transaction.
- More specifically, we need to include the following parameters “metadata-json-file” in the transaction command.
- chknft_info.json is a json file that contains the metadata of the NFT. Example:
There are companies selling Cardano NFT already. Below are some examples:
After the minting, we can check the possession of tokens in our Daedalus Wallet.
Unfortunately, metadata is not available on Daedalus Wallet yet, but it can be checked on cardanoscan by looking up the transaction.
Another way is to check on pool.pm by looking up the wallet address
The biggest advantage of minting NFT on Cardano is the low cost. As example above, the cost is only 0.205937₳!!! (compared with 0.018904028 Ether, it’s 1/190 of the cost). Price of Ada is ~US$1.2 at the time of writing and that means minting a NFT on Cardano just cost US$0.2471244. I believe it’s very affordable by most of the people who want to tokenize their possessions. Also, we have to bear in mind that even if price of Ada surges (happy to see that happen as Ada holder), Cardano has a voting mechanism to adjust the parameters of the price calculation formula so the transaction cost remains intact.
Wait, Not Ready Yet
Knowing the cost of minting NFT on Cardano is so low, why haven’t we seen people migrating NFT from Ethereum to Cardano? The reason is due to the fact that Cardano’s smart contract is not ready yet.
As you may know, most of the NFT are minted using Ethereum’s ERC721 standard now. There are several functions inside the standard that govern the behaviours of NFT. For example, it governs how NFT are created, how the ownership is decided, how it can be transferred/burned, etc. This can be achieved by deploying a smart contract that complies to ERC721 standard on Ethereum.
For example, we can develop a smart contract on Ethereum that defines if a buyer sends a certain amount of Eth to an address, a NFT will be sent to that buyer automatically. This feature is not available for Cardano yet. For now, trading of NFT is done manually. Buyer has to send certain amount of Ada to an address. Seller of the NFT have to check the balance of that address. And once correct amount of Ada was received, the seller can send the NFT to the buyer. While the seller can automate the whole process using a program/script, the transaction is based on trust between the buyer and seller (possible scenario: seller does’t send the NFT to buyer even if seller has received the money). This is in contrast to the Smart Contract approach that buyer can verify the smart contract logics on the blockchain and the whole process of sending/receiving token/NFT is done automatically without human intervention.
The good news is Cardano’s smart contract feature will be available soon! It will come with the Alonzo hard fork which is expected to come in Aug, 21. I am expecting many platforms will migrate their NFT services to Cardano simply because of Ethereum’s ridiculous transaction cost.
Non-Fungible Token is a ground breaking concept and a killer application of blockchain technology. However, the current high transaction cost of Ethereum is deterring people from adopting this new technology. Fortunately, this pain point can be solved by Cardano and the solution will be complete with the introduction of smart contract feature coming in Aug this year. Looking forward to the mass adoption then.