May 01, 2021
Non-fungible tokens (NFTs) have surged in popularity in the first quarter of 2021. While they have been around for more than four years, the mainstream has started to realize their potential.
Besides artists, many businesses and organizations are implementing NFTs for a range of use cases to benefit from their ability to reflect the uniqueness and rarity of digital and physical assets, and deliver proof of ownership and ensure transferability.
NFTs have many great attributes, but one of the most important features businesses should consider is transaction finality and speed, which pertains to the blockchain network they reside on.
While the speed and finality might not be that important when minting individual NFTs, they become essential when issuing thousands or even millions of NFTs representing licenses, certificates, rights, or physical objects.
One of the fastest blockchains that support NFTs is Algorand. All transactions on Algorand are conducted with instant finality, and the network can process thousands of transactions per second. The great thing about Algorand is that the high throughput doesn’t come at the expense of the network’s decentralization. It is currently the only blockchain that delivers all three key elements – scalability, security, and decentralization – thus solving the Blockchain Trilemma.
Transaction finality is one of the most important features of a blockchain, and it can make a big difference for NFTs, especially if we’re speaking about a large number of them issued or traded at once.
Transaction finality is the process by which any transaction in a blockchain can be considered final and irreversible.
If a transaction is final, it is highly unlikely to be rolled back, and the community can trust it as permanent and immutable. This feature is important because, without it, any blockchain transaction may theoretically be reversed, altered, or canceled.
We use finality to measure the amount of time we have to wait for a guarantee that transactions carried out on a blockchain will not be rolled back. Note that this measurement differs from case to case, and NFT creators must consider this feature when selecting the network.
Some blockchains don’t deliver immediate finality, which can end up in cumbersome processes. For example, if you have to wait 10 minutes every time you buy something, you would give up shopping even if you’re a shopaholic. Such latency is making NFT processes inconvenient for mass adoption.
Bitcoin is one of the most relevant examples with low finality rates. As a rule, Proof of Work (PoW) blockchains have micro forks quite frequently, and the network continually aims to recover to a single chain. During these micro forks, some nodes consider block A as the next valid block, while others consider block B. For a short time, there are two parallel chains that can go on for a few blocks.
In PoW networks, if a transaction is conducted and added in the latest block, you still cannot immediately consider it final. As a result of a micro fork, a branch may overcome the current chain, and your block may completely disappear. Thus, you will have to wait for a sequence of blocks to make sure your transaction reaches finality and doesn’t end up in a dead branch. This is why even though Bitcoin’s average block producing time is 10 minutes, one has to wait for at least one hour to make sure his transaction is irreversible.
Some PoW blockchains support NFTs, but businesses cannot adopt them at scale because of excessive latency.
Algorand delivers the fastest finality possible thanks to its Pure Proof of Stake (PPoS) algorithm invented by MIT Professor Silvio Micali. The consensus mechanism doesn’t admit forks at all, which reduces the risk of micro forks to zero. The block creation time on Algorand is less than 5 seconds, and all transactions reach finality immediately.
Thanks to its low latency level, minimal transaction costs, and carbon neutrality, Algorand provides an ideal infrastructure for minting and trading NFTs.
In addition to immediate transaction finality, Algorand is one of the fastest, high-throughput blockchains in the market. The network can process tens of thousands of transactions per second, with all of them reaching finality within seconds.
This can empower NFTs for a lot of use cases that go beyond crypto art and games.
NFTs are promising because they can be used to tokenize real-world assets, including licenses, certificates, real estate rights, and luxury goods. These are some great use cases, but businesses are interested in high speed and immediate finality when it comes to NFT minting and trading.
For example, companies producing and selling luxury goods may use NFTs to prove the authenticity of items, and they would need to mint hundreds of thousands of NFTs. Waiting for minutes for every NFT is definitely not an option.
On Algorand, you can mint millions of NFTs within hours.
In March 2021, SIAE (Società Italiana degli Autori ed Editori), the largest copyright collecting agency in Italy, used Algorand to mint NFTs representing authors’ rights. It took the agency only several hours to tokenize 4.5 million rights of its 95,000+ member authors. If SIAE used another popular blockchain for issuing NFTs, they would have waited for days.
Algorand makes all processes fast and irreversible. The fact that it is a forkless blockchain not only delivers low latency and high speed but also ensures a high degree of security, which is imperative for NFTs.
Businesses and individuals can create NFTs via the Algorand Standard Assets (ASA) framework, which means they will benefit from all the great features of the Layer-1 network.
Algorand can really make a difference for businesses looking to adopt NFTs and transform various processes. To learn more about the NFT Creator Economy on Algorand, click here.