Vitalik Buterin proposed to transfer non-fungible tokens (NFT) issued on the Ethereum blockchain to the ecosystem of Layer 2 (L2) solutions. So he expects to reduce gas consumption by the main network.
He believes that the segment of non-fungible tokens is experiencing a need for low fees “due to the non-financial nature of a significant part of it.”
But, according to Vitalik, we has a number of significant drawbacks:
• all major rollup platforms with EVM support have backdoors and other security issues, so it is risky to rely on one single solution;
• the NFT ecosystem may become too large to work in a single L2;
• the NFT ecosystem is not closed - it needs to interact with other projects on Ethereum.
The current state of the NFT ecosystem
In general, non-fungible tokens (NFT) are just another primitive on the blockchain. Same as ERC-20 Fungible Tokens.
However, the term NFT has become too widespread. So much so that now, like DeFi, it’s a whole ecosystem.
Non-fungible tokens use many of the same financial primitives as DeFi, and thus the ecosystem looks quite similar while being more consumer-oriented.
Now, Ethereum and Flow dominate the NFT space. Wax approaches them.
I think, most NFT applications will have to migrate from the main Ethereum network to some kind of Layer 2 or sidechain solution, while relying on Ethereum for settlement.
As a possible option, Vitalik proposed a system that allows NFTs to can be transferred between rollup platforms by issuing wrapped tokens.
The system for transferring tokens and NFT works as follows - the user issues a token on platform A and transfers it to a “wrapper manager contract”. Such a transaction contains a commentary-indicating platform B to which the asset is to be transferred, as well as information about the original owner.
The contract stores this information in a special store and assigns a serial number to the NFT. Platform user B, knowing the serial number and address of the original token holder, can release a wrapped version of the token.
The wrapper management contract stores the information passed to it until the platform B token is redeemed, which prevents duplicate NFTs from being issued again.
According to Glassnode, the NFT segment is the main consumer of gas on the Ethereum network. Therefore, the decision to launch NFT in ZKSwap at the Layer 2 is more relevant than ever.
Most NFT applications witch targeting the end user (such as games, sports, virtual worlds, useful assets, etc.) have gone through instability in the Ethereum network.
As a result, many of them decided to develop their own protocol, but were unable to achieve the necessary scalability on the Ethereum network. As a result, many are exploring Layer 2 solutions and sidechains.
I think, we can say - at Level 1 the main competition going at the level of smart contracts, and at Level 2 will be competing for superiority in the field of NFT.
Over the last year, the NFT space has grown to multi-million dollar turnovers and is still growing rapidly. A distinctive feature of NFTs is that they are largely consumer-oriented, so the requirements for a Layer 2 solution will be slightly different from DeFi.
In my opinion, ZKSwap needs to realize the following competitive advantages:
- Easy entry - an NFT solution should be as convenient as possible for a wide range of users.
- Marketing and information support - for mass products, high-quality promotion, quick feedback, a sufficient amount of information and user manuals are very necessary.
- Speed and reliability - nobody likes to wait. NFT trading and storage should be fast and smooth.
- A wide selection of tokens for payment - it would be convenient if you could pay for NFT not only in ETH.
- Development strategy - there is a lot of competition in the NFT market. Users should know the development plan for the near future.
It is very important to understand, that all components are important for NFT - architecture, speed, reliability. But, I would put usability first.