Apr 26, 2021
While non-fungible tokens (NFTs) have been around for several years, they started booming at the beginning of 2021 as the realization of their potential of these tokens for digital art, entertainment, copyrights, and other use cases became more mainstream.
NFTs deliver provenance and originality, the two key elements for the art, collectibles, and luxury goods markets. They also benefit from the immutability and decentralization of blockchain, the underlying technology powering NFTs.
Still, while NFTs leverage all the benefits of the blockchain, they also share its risks, and the most important risk is the hard fork. This is why NFTs should ideally be created on a forkless chain.
Let’s start with the definition of a fork. In a nutshell, it represents a split in the blockchain network that results in a new, updated version of the code and protocol.
A blockchain is a network of computers, or nodes, that run the chain’s software and work collaboratively to add new blocks after verifying each transaction or operation. The more nodes, the better for the security of the network.
Nevertheless, sometimes it happens that the software of various miners or block validators ends up misaligned. It may happen because some miners adopt some kind of update (let’s call them Group A) while others continue with the old version of the software (they’re Group B).
If all miners agree to the update promoted by Group A, then what we get is a soft fork – the code of the blockchain software is changed, but the network remains the same, and older blocks are part of the same chain.
If block validators cannot agree on the updates proposed by Group A or Group B stays the course, then the network is split in two, and we get two different blockchains that begin at the same block and then go on separately. This is what we call a hard fork.
The old blocks are common for both chains, but post-fork blocks are unique for each new chain. As a result, cryptocurrency holders receive the token of the forked network for free, essentially creating two of the “same” token, at which point the dominant chain typically retains the name of the original cryptocurrency and the forked chain will end up with a different name.
Note that there are forkless blockchain networks that make it impossible to trigger a split like this, and we’re about to discuss why they’re ideal for NFTs.
There are two main hard fork scenarios that are an issue for NFTs:
If there is a mirror chain where an NFT asset has become duplicated, there is nothing digitally unique about it. This is a fundamental issue when it comes to NFT and the main argument why NFTs must be on a chain that does not fork.
To avoid the total loss of value of NFTs, artists and developers should pick a secure, forkless blockchain network.
Algorand delivers the elements required for frictionless NFT creation and management – throughput and near instant finality to ensure optimal price discovery by small or large scale participation (whether through an auction or other mechanism), simplicity of tooling and layer-1 primitives to empower developers to focus on more pressing business items, decentralized by design to ensure that the blockchain will endure to support the long term value of an NFT, and ease of transacting to ensure that transfers are inclusive, atomic, and low cost.
Additionally, Algorand is mathematically proven to be immune from forks. It can never split into two or multiple networks. It has achieved a degree of decentralization so solid that there is no cluster of node validators that could ever change the code. This is because node validators are picked randomly by the system, and thus no token holders have more authority than the rest of the community.
Algorand is uniquely positioned as the premier platform to create, launch and manage NFTs due to the facts that it can not fork, has low transaction fees, simple smart contracts, atomic transfers, high throughput, is secure, and the entire network is carbon negative.
By leveraging Algorand for your NFTs, there is peace of mind that your unique token is protected and can never be replicated or duplicated, as the network is immune from hard forks.
To learn more about NFTs on Algorand, check out our guide to the New Creator Economy.