The Advantages of Interoperable NFTs
NFTs (non-fungible tokens) have an interesting history. They were one of the first assets exclusive to the blockchain smart contract era. Fungible assets started with Bitcoin and were the main type traded during the first generation of blockchains.??
For this reason, they became closely linked to their parent blockchains and, for a long time, connected to a specific blockchain ecosystem.?
Now, this has evolved due to the advances in blockchain technology and the embrace of a wider multi-chain approach by users and developers.?
Let’s go over the five benefits brought by this increased?interoperability?and its effects on NFTs and asset tokenization.
Key Takeaways
Where Do NFTs Come From?
First, let’s quickly recap the history of the?NFT.?
The non-fungible token was first created on Ethereum. It was created by Larva Labs Studio, which attached an ID (identifier) to a token-minting smart contract, creating the first format for a token with a distinguishable supply.?
Later, a project called Crypto Kitties would standardize the idea and create the ERC-721 contract, which they would open source. This quick-started the NFT craze in 2017, which catapulted NFTs into the mainstream for the first time.?
However, due to the properties of that particular ecosystem, locking these assets contributed to creating silos for the NFTs.?
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Luckily, improvements in blockchain bridges have reversed this trend and unlocked new value for NFTs by expanding user bases and connecting buyers and sellers across popular blockchain ecosystems. Now, NFT assets can migrate between networks and become truly multi-chain.?
Recently, real-world?asset tokenization?has also become a trending narrative, sparking the interest of businesses and retail consumers, and leading to more potential use cases for NFTs which are key to tokenization.
Let’s review the advantages of this model.?
Strengths of Interoperable NFTs for Tokenization and Other Use Cases
The main advantage to NFTs is that multi-chain capabilities allow them to access more?liquidity?due to an increase in buyers and sellers. Each network has its buyers interested in acquiring the NFTs, so selling them is far easier than when locked to a single network.?
Liquidity also allows for more stable prices. The NFTs can hold their value for longer periods, making them more attractive for some. All contribute to creating a more healthy ecosystem for NFTs that can attract a wider group of new and existing users.?
For those tokenizing assets, this holds great potential and promise as NFTs that are interoperable can make their asset more liquid compared to traditional transaction methods which might be limited to a specific geographical area or single blockchain network.
Next, multi-chain NFTs can have access to a bigger pool of potential buyers. When NFTs are locked to one network, it can be difficult to stand out. Many potentially good projects are simply drowned by the many offerings and are never given a chance.?
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In a multi-chain ecosystem, creators can find buyers in many different blockchains. They have a higher chance of reaching an audience and becoming successful, contributing to a more dynamic ecosystem for NFTs.???
Especially for?businesses?and individuals tokenizing real-world assets and looking to maximize the potential buyer base for their assets, multi-chain NFTs can hold a lot more promising potential.
Silos inside networks lead to potential stagnation as blockchain developers don’t have enough competition to push to create new things.?
From a?developer’s?perspective of NFT products and services, multi-chain NFTs are nurtured from many blockchains, each with different ideas, resulting in more experimentation.?
These assets consistently push the boundaries of what is possible and create lively competition between projects. All of this leads to a more innovative atmosphere that helps all networks grow.???
NFTs locked to a single network are bound by the fortunes of that one blockchain. These move in cycles; there are periods of growth, consolidation, and even contraction. Therefore, if a project launches only in one blockchain ledger, they are subject to the whims of the cycle.?
A multi-chain NFT has a better chance of being exposed to different network cycles. If one network is no longer getting new users, another might be in a period of growth, resulting in more demand and liquidity for NFTs that are interoperable.
Often, a blockchain only has a handful of big?NFT collections. Many NFT projects are limited in their value due to the constraints of the given ecosystem and the number of users it has.?
However, multi-chain NFTs can attract users from several networks, meaning more collections can reach or even break that ceiling. More valuable collections also mean more trading activity and more adoption for the blockchain industry as a whole.?
As more NFTs, used in a variety of use cases, are adopted and evolve to fit the needs of users, the ecosystem as a whole will continue to expand and onboard more businesses and users. This feedback loop inevitably brings more awareness, resources, and development to NFTs.
NMKR: A Platform to Tokenize Assets
NMKR?is an NFT and Tokenization platform service leveraging the Cardano blockchain. It provides a user-friendly platform that enables businesses and individuals to create NFTs without having to require coding skills.
To date, NMKR’s NFT tools have been used by businesses, gaming projects, creators, and more to successfully mint NFTs of various assets, including diamonds, e-books, and gaming items.
Its various products including NMKR Studio and?NMKR Pay?with multi-language support allow businesses and individuals to enter the Web3 space seamlessly and even provide traditional fiat payment options to mint NFTs.
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Disclaimer?
You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by EMURGO to invest.