Interoperability of NFTs: Challenges and Opportunities

The person who even has slightest knowledge of crypto-industry is atleast familiar with the term "NFT". As amazing as the development of the last decade has been, there are still some challenges when it comes to their usage. Among those challenges, interoperability is one of the major ones. This article will describe why this is a chllenge and at the end, some of the potential opportunities it holds for the interested parties.

What are NFTs?

By definition, a Non-fungible Token (NFT) is a unique and immutable unit of data stored in the blockchain. Simply put, an NFT cannot be duplicated or reproduced. NFTs can be associated with digital assets/arts/numbers such as photos, videos, and audio.?

These digital assets have a unique identification code and metadata to distinguish them from one another. It is also encrypted by the digital signature of the artist.

Lets understand this concept with an example of a crypto-currency, say ether, when you exchange one ether for another, you’re essentially retaining the same asset just as you would if you exchanged one dollar bill for another dollar bill. But this is different in the case of NFTs, since these assets are non-interchangeable, they can’t be traded one to one without losing any value or changing the nature of the asset.

NFTs are usually traded in crypto currencies, but trains paired with fiat provide liquidity for this trade. NFT marketplace such as Opensea are using Ethereum, Solana, Klaytn etc for trade. However, adding Fiat makes NFT more liquid and it will bring NFT art/assets to masses and adoption will be easy & speedy.

What is interoperability of NFTs:

Interoperability of NFTs means that the NFTs that, once bought, can be taken to another blockchain network that supports NFTs. Take the gaming industry for an example, if you have bought an NFT in a game 1 on one blockchain & want to try this NFT out in another game on a different blockchain(game 2), It will be possible for the you to take your NFT from the game 1 to the game 2, granted that the game 2’s blockchain allows the use of NFTs and realizes its value, otherwise that NFT will only be allowed to be in the game 1.

NFT Interoperability Challenges and Opportunities:

Simply put, consider the level of collaboration required among stakeholders like developers, artists, internet providers, device manufacturers, and many others, to only agree on interoperability standards like those required for graphical rendering. Each group would have its own reasons for supporting one format over another1. For example, Nintendo uses Maya or 3DSmax, while one of its competitors, Electronic Arts uses their own graphics editor, it would be a big challenge to even convince both these companies to work together on this aspect alone unless it has something too big in it for both parties.

Take another example to clear the issues posed in the way of interoperability, as we stand on the verge of web 3.0 and metaverse, consider the issue of potential first-mover disadvantage in this sector. Which major gaming trademark would readily relinquish control of its brand, plot, or leading characters in order to enable other franchises inside its game? Why would Nintendo allow Axie (an NFT based online game) to enter its Pokemon game series or why would they permit ‘Princess Peach’ to be brought into ‘Star Atlas’? Unless they gain some real value from it, they would never allow it1.

Then there are issues of virtual rendering as well as design differences (color palettes, art styles, visual info fidelity), as well as file format and coding differences. In short, there are a number of issues involved in attaining this interoperability, getting everyone on the same platform may be one of the biggest hurdles on this route.

There are NFT asset interoperability challenges on different blockchain and platforms. How can these challenges be opportunities for builders and entrepreneurs?

Opportunities:

Sky is truly the limit when it comes to earning ideas using NFTs. Several entrepreneurs are already working on this subject. Some of the opportunities that arise from these challenges are mentioned here in this article.

• Interoperable platform:

Developers can create an interoperability platform where they let these companies operate without exchanging data and compromising security.

• Policy makers:

Entrepreneurs can be the policy divisors between industry giants planning to use interoperability, providing a set of rules both parties can agree upon. It's an extensive task but the rewards will be equally beneficial. Developers here can also restrict data sharing and prevent the other company from accessing the data that is not in the terms of? contract.

• Cyber Security or Fraud elimination:

Developers and entrepreneurs can work together to create a system where mitigation of artists is impossible. They can also introduce a way to verify whether the NFT on sale actually exists or is just a fraud to loot money. This can be done by checking metadata and encrypted signs of the artist.

• Token Creation:

Small businesses can create their tokens for their clients to engage with their brand when their business is on a blockchain with a good amount of traffic or larger enterprises. The more attractive NFT can hitch a customer with the brand and enhance sales.

• Creating NFTs:

This is a very obvious opportunity and is, thus, equally saturated. One can create his or her own NFTs and put them up for auction or market them through quora or reddit. The blockchain developers can work with the NFT developers to make their NFT Accessible on other blockchains.

• Blog:

As this business is still in developmental stages, bloggers can use this opportunity to build their readership. Readers on the internet are constantly on search for valid newsletters? or blogs about developments in NFTs. The blogging channel, after building sufficient readership, can either be monetized or used for influencer marketing. A newsletter will serve the same purpose.

Final Thoughts:

Designing for attaining NFTs interoperability is by no means an easy feat. It needs a lot of brainstorming and collaboration. Interoperability is not something that will happen quickly.. Progress will most certainly be slow, manifesting itself in a variety of subtle advances across development, engineering, artwork, and product management fields. It is a certainty that corporations will gradually reduce the hurdles preventing it from happening, some of which are mentioned in this article.

But companies already operating with a number of blockchains games under their umbrella can move swiftly down this road. The process of interoperation of NFTs will be more attainable for them.

Note: This data is based on research performed by RNS Solution’s Blockchain Research Lab.