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The NFT market is largely dominated by Ethereum. Here's why and what that means.
Origin of NFTs
Non-fungible tokens are indivisible and typically unique digital tokens. “Non-fungible” means they are not interchangeable in the same way a fungible coin or token would be interchangeable. For example, blockchain assets like bitcoin (BTC) or ether (ETH) don’t hold special or unique value and can be freely exchanged — much like a U.S. dollar can be exchanged for any other dollar.
These NFTs can be used for a variety of purposes such as digital art collectibles, audio and video files, gaming items, records and IDs, event tickets, and a variety of other use cases. The earliest digital collectibles actually predate the term “NFT” altogether and used special smart contracts to store these unique digital tokens.
NFTs and Ethereum: A Match Made on the Blockchain
While the Bitcoin blockchain predates Ethereum, the way Bitcoin is designed doesn’t easily allow for anything other than bitcoin (BTC) to be transacted on its blockchain. This made Ethereum a prime alternative for those that wanted to expand the possibilities of blockchain-based tokens.
In 2017, CryptoKitties was the first NFT collection to be launched on Ethereum (earlier digital collections used smart contracts). It used Ethereum’s then new token standard (called ERC-721) that was developed with NFTs in mind. CryptoKitties was a game that allowed you to trade and “breed” these digital collectibles and it became quite popular. As the first blockchain with an NFT standard and a popular NFT collection, others digital collections also chose to launch their NFT collections on Ethereum.
In 2020, the popularity of NFTs exploded — and most of this popularity was concentrated on the trading of popular collections like Bored Ape Yacht Club (BAYC) on NFT marketplaces that used the Ethereum blockchain. When it came to the biggest projects that commanded the highest prices, Ethereum NFT projects dominated the sector.
NFTs on Other Blockchains
For all of Ethereum’s early success with NFT activity, there are numerous other thriving NFT collections on blockchains such as Flow, BNB Chain, Solana, Cardano, and many others. With its first-mover advantage, the NFT market on Ethereum still holds a substantial market share. However, you are increasingly seeing collections migrate or initiate their NFTs on other blockchains that have lower fees or other advantages.
Regardless of the blockchain one uses, it looks like NFTs are here to stay. While some of the hype of 2020 has died down, there are still avid NFT collectors of digital art and other items. Further, NFT use cases have expanded beyond the artistic realm into real-world use cases for identity, anti-counterfeiting, and blockchain-based identification and authentication systems.
For those that purchase collectible NFTs, many are drawn by the collection — not the blockchain it uses. However, if you want to buy an NFT, you’ll likely need a crypto wallet and a cryptocurrency that is accepted by the NFT marketplace you are using.
- The NFT market is largely dominated by Ethereum, though they thrive on other blockchains as well, including Flow, BNB Chain, Solana, Cardano, and many others.
- CryptoKitties was the first NFT collection to be launched on Ethereum.
- Bitcoin predates Ethereum but its technology did not permit the creation of NFTs at the time.
In this lesson, we learned what an Ethereum NFT is. Next, we learn how to buy one.