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Over the span of a couple of years, new layer 1 blockchain protocols have come and gone with one shared mission: Beat Ethereum. Although this goal is becoming more and more unattainable as Ethereum continues to build on its network effect, some altcoins have provided a sustainable alternative to the behemoth.
This is especially apparent in the NFT market. With 97% of NFT sales conducted through the Ethereum network, you could say that the network almost has a complete monopoly in this facade of the crypto-sphere.
So what's the problem with Ethereum? It seems like they've been dominating the market for years. If they have near-complete market control, there shouldn't be anything wrong with the network... right?
You're right and wrong. This topic hasn't reached a consensus as of yet. Ethereum has pros and cons, just like any other coin.
By looking at the pros of buying and selling NFTs through the Ethereum network, we can see that the rise in demand for NFTs and DeFi apps has occurred through the network for good reason. Several factors are involved in NFT-enthusiasts' love for the king of layer 1s.
Ethereum was the creator and adopter of smart contracts in 2015. As fans know by now, this paved the way for NFT transactions. Smart contracts opened the door into a decentralized world unbeknown to us previously. With smart contracts, two parties could create a contract stored on a blockchain while remaining completely anonymous. Another reason to say goodbye to traditional banking entities!
The ERC-721 token was a game-changer for NFT transactions. It tokenized the ownership of any type of data between parties using smart contracts. Furthermore, compared to its predecessor ERC-20, the ERC-721 token is non-fungible in nature. This allows holders to mint their NFTs, thus recording the data into a smart contract on a public ledger. What's more, individuals can monetize their work by setting a fee for consequent sales of their digital assets in the future.
Ethereum has a unique advantage compared to other alts. As I discussed earlier, its network effect is much higher than competitors. What does this mean? As more and more users turn to the Ethereum network for purchasing and selling NFTs, the value of the service is increased.
More users = more content = more information = more connections in the network.
An example of a company with outrageous network effects is Meta. Since it owns Facebook, WhatsApp, and Instagram, users need to use the web of networks to fulfill their socialization needs. However, if a user decides to switch to a smaller social network like read.cash or hive.blog, they will experience fewer connections with others worldwide.
On a side note, this is why it's essential to promote read.cash to your friends and family! We want to increase the number of daily active users to improve our own experience on the platform.
But large networks are still inferior to smaller networks if factors like functionality, user experience, and compatibility are inferior to their rivals. Luckily for the Ethereum network, it is compatible with a multitude of services and products.
In the NFT space, Ethereum is fully compatible with OpenSea, the largest NFT trading platform. Solana on the other hand, a competing layer 1 with the potential to beat Etherum, is only compatible with its own platform - Solanart. Unfortunately, Solanart is smaller than OpenSea, thus attracting fewer potential users.
Just because Solana is less compatible than the Ethereum network, it doesn't mean that it can't beat Ethereum in other aspects.
Solana's glaring advantage stems from its hyper-fast transaction speeds and low transaction fees. As you can see in the image above, it is on par with Visa in transactions per second (TPS). Just look at Ethereum with a TPS of 20! Solana is 3,250 times faster than Ethereum. That's pretty impressive if you ask me!
With blockchain transactions, we can also apply the supply-demand model. Since Ethereum's TPS is low, users are willing to pay higher gas fees to process their transactions quicker. Currently, the average transaction fee on Ethereum is $15.
This may not be much to you, but transaction fees are even higher with ERC-721 tokens due to the complex nature of NFTs. For example, in the recent CloneX drop, I witnessed gas fees of over $200 for members in the community.
On the flip side, Solana has an incredibly low average transaction fee of $0.00025. Solana's lower block time of 0.4 seconds and larger block size of 20,000 transactions facilitate the unbeatable transaction fees. It looks like Solana's proof-of-history consensus is efficient!
Low transaction fees are crucial for the NFT gaming market. Take Axie Infinity, a popular NFT game built on the Ethereum network. Players can breed their Axies up to 7 times. The cost increases proportionally to the number of times players have bred their Axies.
Through Solana's network, players will be able to breed multiple times without the ridiculous increases in prices. This produces opportunities for developers and artists alike. They can finally create projects that are too expensive to mint on the Ethereum network. The network is perfect for turn-based NFT games and 3D NFTs.
Quite frankly, both networks are fantastic in their own respect. Minting an NFT in the Ethereum network will probably put more eyeballs on your project due to its high network effect.
Just remember to consider gas prices in your total cost as they can reach triple-digits.
Solana is better for the newer generation of NFTs. For example, 3D NFTs are becoming popular with projects like The Psychedelic Anonymous and Crazy Babies shocking NFT influencers. I bet projects will move to Solana once they see the benefits.
Audius is the latest project moving to the Solana network. As announced on their website:
"It was clear that Solana was the only system that could deliver the speed, low fees, and censorship resistance necessary to grow Audius to a mainstream, global audience."