Apr 29, 2021
Non-fungible tokens (NFTs) have managed to consolidate as an independent market after several consecutive months of impressive gains. Many digital artists, athletes, celebrities, and businesses are implementing NFTs across various use cases.
Nevertheless, minting and trading NFTs is not that easy. The trend is still emerging, and most platforms don’t prioritize the user experience for now. Despite everything, there is a massive influx of newcomers as more and more individuals and businesses realize the potential of NFTs.
With many looking to get in on the NFT excitement right now, many entities are building NFTs without much due diligence. The good news is that there are some ideal platforms for creating and managing NFTs that bring critical benefits to users and the assets. Algorand is the best example.
One of the main reasons why you should use Algorand for developing your NFT ecosystem is that the required functionality is built directly into its Layer-1 protocol. There is no need for additional layers that can compromise security, add extra costs, and generally increase risks.
Layer-2 refers to a secondary framework or infrastructure built on top of an underlying blockchain. This is different than the core, blockchain protocol which we call Layer-1.
For example, Bitcoin or Algorand are Layer-1 because they are the core blockchain protocols. On top of them, one can build a secondary framework that would operate independently but, in the meantime, would communicate with the underlying chain. These additional networks are called Layer-2 because they are outside the main chain.
Layer-2 solutions are frequently required because many blockchains cannot meet the huge demand for high transaction speed and new features related to innovative trends, such as decentralized finance (DeFi) and NFTs. The Bitcoin Lightning Network, as an example, is a Layer-2 solution that is meant to ensure high throughput on Bitcoin to enable faster payments and increase scalability.
In fact, scalability is the main keyword when it comes to secondary layers, as many blockchains are striving to meet the increasing demand for fast transactions.
While many Layer-2 frameworks are highly sophisticated tooling, they can have hidden loopholes or bugs that compromise the security of operations. It’s worth noting that Layer-2 solutions borrow the security benefits of the main chain, but they still cannot boast the same robustness. Besides this, Layer-2 systems are generally more centralized than the underlying chains.
Algorand’s Layer-1 blockchain is scalable, secure, fast, final, low cost and sustainable - making it an ideal platform for a wide variety of assets, including fungible and non-fungible tokens (NFTs). The required functionality is built directly into Layer-1, removing the need for added complexity and risk with a Layer-2.
Algorand is the first and currently the only distributed network that addresses the so-called Blockchain Trilemma, as it achieves all three key elements of an ideal blockchain – scalability, security, and decentralization – without compromising any of them. Algorand can handle thousands of transactions per second and blocks are final within seconds, making it one of the fastest blockchain infrastructures out there. Despite its high throughput, it still manages to maintain the highest possible degree of decentralization thanks to the Pure Proof of Stake (PPoS) algorithm, which picks block validators randomly from all token holders. It is also guaranteed not to fork, which ensures the longterm protection of a unique NFT asset.
Algorand’s Layer-1 functionalities enable users to create, launch and manage NFTs on the public network, which means that they’re highly secure, unique, efficient, and user-friendly.
For NFTs, all three elements mentioned above are very important. Particularly, these tokens require trustless systems to record the ownership of digital assets. Trustless means the underlying network should have no intermediaries or centralized entities to execute operations. In an effort to achieve scalability, some blockchains are scarifying their decentralization potential. Algorand is a trustless system that enables inclusivity and full participation of its community, thanks to the unique consensus mechanism invented by MIT Professor Silvio Micali. Algorand is a public, permissionless blockchain, enabling everyone to become part of the ecosystem and build on its Layer-1 network. It has all the key features required for a robust, scalable, and efficient NFT ecosystem.
While Algorand can support a Layer-2 framework, it would be used for building off-chain smart contracts that are too big and complex to reside on the MainNet. In some cases, businesses might need to develop smart contracts that are too sensitive to make public, so they can leverage or create Layer-2 solutions. However, Algorand's Layer-1 has all the attributes of a scalable and secure network for all digital assets, including NFTs.
With a strong developer focus since day one, Algorand empowers developers to create NFTs as an Algorand Standard Assets (ASA) – a simple token creation framework that resides on Layer-1. The ASA is build right into Algorand's Layer-1 and thus these assets benefiting from the core features that include security, true decentralization, transaction finality, and scalability on a network that does not fork. NFT creators are leveraging a network with high throughput, low fees, and simplified developer tooling when they leverage the ASA capability on Algorand.
Many companies today are realizing the power of Algorand's ASAs as they create and launch NFTs for all kinds of use cases, including art, supply chain, real estate, gaming, identity, certifications, and collectibles.
Here are the most popular asset types that you can build on Algorand’s Layer-1 chain:
Building NFTs on Algorand’s Layer-1 can be a game-changer for your business because of the following reasons: