fbpx
Connect with us

Bit Coin

Why is Ethereum used for NFTs?

Published

on

Why is Ethereum used for NFTs?

Nonfungible tokens (NFTs) are compatible with any Ethereum-based project. You could, for example, trade a piece of a portrait for a ticket!

Most NFTs are part of the Ethereum blockchain at a high level. Ether (ETH), like Dogecoin (DOGE), is a cryptocurrency, but the Ethereum blockchain also enables these NFTs, which store additional information that allows them to function differently from digital currencies.

Related: What are NFTs, and why are they revolutionizing the art world?

NFTs have incredible potential, and the ERC-721 was created to address the need for unique tokens. Moreover, due to its rarity or age, the ERC-721 standard is distinct and can have a different value than another token from the same smart contract. The Etherscan NFT Tracker ranks the top NFTs on Ethereum by volume of transfers. 

But do you need Ethereum to make an NFT? The answer is no. Ethereum is not a prerequisite to creating NFTs. Other blockchains like Solana (SOL), Cardano (ADA), Tezos (XTZ), BNB Chain (BNB) and Tron (TRX) are alternative platforms for minting or creating NFTs.

So, if you want an answer to, “Is ETH the only way to buy NFT?” The answer, again, is no. Each platform requires the transaction fee to be paid in its native token. For instance, 2 ADA (Cardano blockchain’s native token) is the cost for the NFT-MAKER PRO platform, which is paid to the customers’ wallet together with the minted NFT (a requirement from Cardano).

Ethereum is the leader among other blockchain networks and NFTs were born on the Ethereum blockchain. As a result, NFTs sell for a substantially higher price on average, so creators prefer them over other platforms.

Because of its highly-secure network and data architecture, the Ethereum blockchain leads the decentralized finance (DeFi) market, with the bulk of NFT projects running on it as ERC-721 coins. In addition, the blockchain provides NFTs with extensive exposure to a large and growing market. Moreover, NFT systems should continue to be Ethereum virtual machine compatible so that Ethereum wallets like Metamask can support them.

However, the high volume of network traffic causes a significant transaction backlog, leading to a substantial increase in transaction fees. Rarible, OpenSea and Nifty Gateway are three popular Ethereum-based NFT marketplaces. Nonetheless, because of the Ethereum blockchain’s limitations, NFT creators have turned to other solutions, such as the Solana blockchain, to overcome these difficulties.

Ethereum NFTs vs. Solana NFTs

The consensus process used by Solana and Ethereum is different. Proof-of-work is used by Ethereum, which results in a more decentralized network with less scalability. The ETH 2.0 is designed to address the dreaded scalability issue that has threatened its NFT and DeFi market shares. As a result, the blockchain leader may lose its status unless the 2.0 upgrade is implemented quickly. 

In contrast, Solana uses a combination of proof-of-stake and proof-of-history, a less secure but more efficient method that allows for fast and low-cost transactions using its native currency called SOL. However, Ethereum is a mature project with a significant market position, increasing creators’ confidence in minting NFTs on the Ethereum blockchain.

SolSea is Solana’s open NFT marketplace. When minting NFTs, it allows creators to choose and incorporate licenses. That said, collectors know what they’re buying and creators know what they’re selling. Solanart, a prominent NFT marketplace that launched before SolSea, is another popular NFT marketplace on Solana.

The fundamental goal of Ether is to make the Ethereum smart contract and decentralized applications (DApps) platform operations easier to use and monetize, rather than to establish itself as a new monetary system. However, Satoshi Nakamoto called Bitcoin a peer-to-peer electronic cash system.

Smart contracts that assign ownership and govern the transferability of NFTs are used to create nonfungible tokens, which the Bitcoin blockchain doesn’t support. NFTs are not fungible since they are not interchangeable. While each Bitcoin will have the same value, each NFT could represent a different underlying asset and hence, have a distinct value.

Related: Fungible vs nonfungible tokens: What is the difference?

For example, when someone generates or mints an NFT, they are executing code that is stored in smart contracts that follow various standards, such as ERC-721. This data is stored on the blockchain, which is where the NFT is managed.

In addition to the above, each token has a distinct identity that is tied to a single Ethereum address. That said, each token has a unique owner who can be easily identified as they are Ethereum-based and can be purchased and traded on any Ethereum-based NFT exchange or market.

When choosing any blockchain for minting NFTs, such as Ethereum for NFT development, ensure the robustness of its smart contracts, check the blockchain’s fee structure, security measures and transaction speed, and assess the possibility of forking.

In the cryptocurrency market, NFTs are a significant niche. They provide further exposure to cryptocurrencies for people who might not otherwise have come into contact with these assets. In addition, they actively contribute to the mass adoption of blockchain technology because they are so closely linked to digital art and gaming.

However, the resilience of a blockchain’s smart contracts is a major component of the overall security of distributed ledger technology. Smart contracts must go through extensive testing to provide the highest level of reliability and efficiency, ensuring minimal risk of downtime, breaches and hacks.

Additionally, cost-effective solutions are required for NFT-based transactions, which is critical for using and adopting nonfungible assets. As a result, the cost structure for NFTs on the blockchain is an important factor to consider, with feeless being the ideal option.

Hard forks can jeopardize nonfungible features, as duplicating NFTs calls their integrity into question. Therefore, it is critical to design NFTs and their marketplaces on fork-resistant blockchains.

Similarly, as blockchains are immutable by design, faster finality means attackers have fewer time frames in which to compromise the digital ledgers. Therefore, any platform that achieves faster transaction finality while maintaining decentralization is ideal for creating NFT marketplaces.

Other than these considerations, the final selection of blockchain for NFT development depends on your goals, like why you want to own NFTs, your budget and your investment objectives. If you are clear on the questions, you need to do your research and compare various NFT blockchains before spending your hard-earned money.

Go to Source

Bit Coin

Bitcoin Miner Sell-Offs Could Keep Prices Low, Says JP Morgan

Published

on

Bitcoin Miner Sell-Offs Could Keep Prices Low, Says JP Morgan

Strategists at JPMorgan Chase & Co. believe the current Bitcoin sell-off by miners could make it difficult for the price of the asset to bounce back, especially if the trend continues.

In a note released yesterday, they pointed out that publicly listed Bitcoin miners account for 20% of all reported Bitcoin sales in May and June. It’s likely that private miners are also selling at the same rate or even higher, given that they have limited access to the capital markets.

The massive sell-off is a sharp turn in the strategy that has mostly been about holding block rewards until the market conditions get better. But the drop in Bitcoin prices and its effect on miners’ profitability means many are now struggling to meet operating costs.

According to the strategists,

Offloading of Bitcoins by miners, in order to meet ongoing costs or to deliver, could continue into Q3 if their profitability fails to improve.

Already, it has likely “weighed on prices in May and June, though there is a risk that this pressure could continue.”

However, JP Morgan strategists point out that it’s not all gloomy. One silver lining is a drop in the cost of mining Bitcoin from around $18k – $20k earlier in the year to $15k this month. This is due to the drop in hash rate and mining difficulty over the past two weeks.

Meanwhile, the cost of production varies based on the size of the miner. According to Arcane Crypto, large miners spend around $8,000 to produce one Bitcoin. Meanwhile, Securitize Capital says the cost of production might be over $20k for some miners after adding overhead costs and interest rates.

Bitcoin Price 69% Away From ATH

Bitcoin price has declined by more than half compared to its value at the beginning of the year. It’s also down 69% from its all-time high as it hovers around the low 20k range in the last few weeks.

Several factors have pushed the crypto markets over the edge, including the crash of Terra’s ecosystem and the near-insolvency of crypto firms such as Celsius and 3AC. But the Fed hike in interest rates has been the primary factor behind the drop.

Almost every other niche in the space, like non-fungible tokens and decentralized finance, has reported losses too. With most miners also having debt obligations, selling their Bitcoin stash appears as the best course of action to stay afloat.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

Go to Source

Continue Reading

Bit Coin

Bitcoin Energy Consumption Declines as Miners Grapple With Falling Revenue

Published

on

Bitcoin Energy Consumption Declines as Miners Grapple With Falling Revenue

Bitcoin mining is no longer consuming as much energy as before, according to a Cambridge Bitcoin Electricity Consumption Index report, which shows a 25% decline in energy use since the start of the month.

Per the index, the current energy consumption of Bitcoin is 10.65 gigawatts, significantly lower than the 14.34-gigawatt on June 6. This means its annualized consumption is at 93.33 terawatt-hours, putting it below countries like Argentina and Norway in energy consumption.

At its peak, the BTC network needed 16.09 GW of power. The drop in the consumption from its record high of 150 terawatt-hours in May is likely due to the drop in mining hash rate. 

Bitcoin hash rate is the computing power needed to create a block on the Bitcoin network and has dropped to 199.225 exahash per second (EH/s) over the last two weeks. This came after the mining difficulty reached a record high of 231.428 EH/s on June 13. It has now dropped by almost 14% since then.

The index estimates the energy consumption by using a profitability threshold using “different types of mining equipment as the starting point.” 

With Bitcoin prices nosediving to below $20,000 this month, some miners have also gone offline as mining proved less profitable. This explains the consecutive drop in the consumption and hash rate.

Miners are Selling Their Bitcoin Holdings

Additionally, the drop in the price of Bitcoin has left several miners in a lurch as they struggle to sustain their operations. A recent report by Arcane research shows that publicly traded Bitcoin miners sold all the coins they mined in May.

This is usually against the strategy of most miners, which is to hold their Bitcoin for better market conditions. But with profitability nosediving and many miners struggling to generate a positive cash flow, they are selling their holdings. 

According to the report, many miners sold their Bitcoin to cover operational expenses and pay off debts. One of such is Bitfarms which decided to sell 3000 Bitcoin for $63 million to improve corporate liquidity.

Energy consumption of Bitcoin mining has been one of the major criticisms of the network and cryptocurrency industry. But recent research by Michel Khazzaka reveals that the traditional banking sector uses 56% more energy.

What do you think about this subject? Write to us and tell us!

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

Go to Source

Continue Reading

Bit Coin

Coinbase to Offer Nano Bitcoin Futures Contracts via Third Party Brokerages

Published

on

Coinbase to Offer Nano Bitcoin Futures Contracts via Third Party Brokerages

Coinbase will list a derivatives product called the nano futures contract on Monday.

This will be the first product listed on the Coinbase Derivatives Exchange, offering investors the opportunity to buy a contract linked to the price of one-hundredth of a bitcoin. Customers can purchase the Nano futures contract through third-party brokerages. Customers will not be able to buy the nano futures contract from Coinbase directly until the exchange receives a license to operate as a futures commission merchant. The exchange first applied for the license on Sept. 16, 2021.

U.S. customers have a healthy appetite for crypto derivatives

Coinbase floated the idea of bringing derivatives to its U.S. customer base after purchasing derivatives exchange FairX in January this year.

Americans have long been trading derivative products on foreign exchanges, sinking their teeth into high-leverage products that U.S. exchanges have lacked, indicted by the volume of crypto derivative trades in December 2021 surpassing that of spot trading. Binance alone recorded $52.5 billion in derivative trade volume during the 24 hours ending Friday afternoon, compared to $12.7 billion in spot products. Coinbase enjoyed $1.7 million in spot trading during the same period.

It’s worth bearing in mind that the new nano futures contract will not offer leverage-type bets that drive volume on exchanges like Binance.

Challenges Coinbase faces

A report by Barron’s suggests that it would take a long time for derivatives products to generate significant income for the company.

The new Coinbase product will enter a market of established crypto derivative products, while the company battles cash flow problems.

In March, the CME Group announced micro futures contracts linked to one-tenth of the price of bitcoin and Ethereum.

To add pressure, Moody’s Investors Services recently reduced Coinbase’s guaranteed senior unsecured notes from Ba2 to Ba1, relegating its corporate debt to “junk” status, with the potential for future downgrades. Ba ratings are assigned by Moody’s to credit obligations containing speculative components, considered to be a serious credit risk. Moody’s cited Coinbase’s reduced revenue and cash flow due to the current crypto market downturn as reasons for the downgrade. Coinbase’s recent employee layoff did not count in its favor, with the rating agency still seeing threats to the company’s profitability.

Dan Dolev, a senior analyst at Mizuho, believes that the new product does not address the central issue of competitors offering zero trading fees, which would severely affect revenue if Coinbase were to compete.

Coinbase’s shares fell precipitously on May 3, 2022, from $130.15 to $62.71 at market close on Friday.

What do you think about this subject? Write to us and tell us!

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

Go to Source

Continue Reading
Home | Latest News | Cryptocurrency | Bit Coin | Why is Ethereum used for NFTs?
a

Market

Trending