After years of development and iteration, a multi-faceted cryptocurrency ecosystem has finally begun to emerge. Especially for industries like DeFi and NFTs, innovation is happening all the time. Each new application and use case builds on the previous ones. Ethereum created $1.5 trillion in value in the first quarter alone, and without it, arguably none of this would have happened. Ethereum gathers most of the liquidity, tools, and users, and it’s where the action happens. For those organizations that have their own NFT strategy, Ethereum is arguably the best ecosystem to launch it. It’s just that there’s a big problem right now, and there’s a huge problem with Ethereum – scalability.
The decentralized nature of Ethereum is its greatest strength, namely its security, immutability and transparency. But all of this comes at a price, and that is network throughput. When demand exceeds capacity, transaction fees rise, which is not cost-effective for small users and businesses. From a business perspective, both costing and user experience are important. So it’s not hard to see why network congestion in Ethereum is a serious problem. However, Ethereum and other public chains have scaling solutions that can help you achieve your goals. The purpose of this post is to compare these different online ecosystems so you can better answer the question – where do you want to build your digital brand?
In the subsequent description of the article, in some parts, we will make the comparison as clear as possible but not exhaustive. For now, there are relatively few production-ready NFT solutions on the market. We will focus on Ethereum’s base layer, Immutable X (Starkware/Volition), Polygon ( PoS Chain), Flow and WAX (built on EOS ‘s L1). At present, it seems that other alternatives are still under development, lack of market enthusiasm, or customized solutions for individual public chains. Before we go any further, we also want to touch on the environmental issue, because of which there has been some criticism in the NFT space recently. However, all the solutions covered in this post have been considered environmentally friendly, or are being developed in an environmentally friendly direction (like Ethereum PoS).
At a high level, we have evaluated these scenarios through some key points (criteria), which are all factors that affect the end-user experience. Now, let’s take a look at these solutions at the network level.
As we mentioned earlier, we take Ethereum network issues seriously. The diagram above illustrates how these different solutions exist for Ethereum and the specific properties of each solution – security and compatibility. On the left side of the diagram you’ll see the labels L1, referring to “Layer 1 Networks”, and L2, referring to “Layer 2 Networks”. Simply put, Layer 1 is an independent network with its own validators and security guarantees, while Layer 2 is a scaling solution built on top of the existing Layer 1 with the same security as the layer it sits on The network is almost the same. For those new to cryptocurrency, having strong security in this case means that validators running a decentralized network cannot easily manipulate or steal user data.
It should be emphasized that the security of different L1s varies greatly, and Ethereum is much better than other L1s. Immutable X is built by StarkWare with new cutting-edge scaling technology, and is the only true Layer 2 (“L2”) technology on display. It is able to provide orders of magnitude higher throughput than the first layer of Ethereum, while having almost the same security as Ethereum. Polygon PoS, Flow and WAX (built on layer 1 of EOS), provide less security. However, Polygon does have a live Plasma execution and can be considered a layer 2 solution with better security guarantees. However, it currently does not support any NFTs (although it may in the future), so we will not consider it in this post. But we will focus exclusively on their PoS chain. Polygon also plans to support other L2 solutions such as Optimistic and ZK Rollups in the future. Again, since these are not yet live, we chose not to include them in this analysis. While this timeline is uncertain, if Polygon adds support for the Rollups scheme, it will be in the same position as Immutable X from a security and throughput perspective, depending on the implementation. If you’re interested in learning more about Polygon, we recommend checking out our recent in-depth study of it here.
Whether it’s NFTs or anything else, a key aspect of blockchain scalability is the “impossible triangle” – the trade-off between scalability, security, decentralization, and generally speaking , can only satisfy both at the same time. To simplify this report, we will treat decentralization and security as synonymous, as the latter is often a consequence of the former.
While the security and scalability trade-off is real for each platform, the degree of the trade-off varies widely among them depending on the specific implementation. Ethereum L1 largely guarantees its security and decentralization, which also results in its throughput being limited to about 15 transactions per second (TPS). Immutable X, on the other hand, is slightly less secure (varies based on Volition selection), but it boosts TPS to about 9,000. That’s why everyone has so much confidence in the future of Ethereum.
While predictions for throughput potential will vary widely, Polygon’s PoS chain was able to reach 7200 TPS on the testnet with 100 validators. At this level of decentralization, this is already an impressive throughput. On mainnet, it hits 300+ TPS at the peak of the network, but more stress testing is needed before it hits its true cap. We prefer to score based on the data of the mainnet, but for fairness, we decided to assume that the TPS of the testnet is the real throughput, so we ranked polygon after Immutable X and ranked second. Because its PoS chain has 99 validating nodes, and there is no permission to join. However, its validator nodes are highly centralized, with Binance accounting for 37% of the total number of nodes.
The EOS chain, WAX’s L1, has an all-time high of 4000 TPS, ranking third in throughput. However, the trade-off in scalability is significantly different – since the entire blockchain network has only 21 validators. So, our team (and others) believe that EOS has a low level of decentralization and its security comes last. In the end, Flow has a throughput of around 100 TPS, which is far from enough if mainstream adoption is the norm, but it is already high for a truly decentralized network. But the fact is that although Flow has 140 consensus verification nodes, most of them are directly run by the Flow team themselves, and they need permission to run nodes, so it is not difficult to see that the form of Flow is also highly centralized, so in the Security-wise, we only consider it slightly higher than WAX. However, we believe that in the future, Flow will be easier to decentralize than EOS, as we believe that Dapper Labs (the company behind Flow) is less likely to deceive users than EOS.
Next, we will evaluate the asset liquidity and ecological compatibility of these platforms. PS: Asset liquidity refers to the ease with which NFTs can be transferred from one chain to another (e.g., withdraw to Ethereum L1). Ecological compatibility refers to the number of high-quality applications that can be easily deployed on-chain and can create assets (for example, supporting OpenSea ). For platforms that achieve both, token holders will benefit, being free to move their assets anywhere and experience greater utility.
First, nothing beats Ethereum in terms of having a huge application ecosystem and numerous asset cross-chain bridges. With that in mind, it’s not hard to imagine why L2 deployed on Ethereum is getting so much attention.
Dark purple indicates EVM compatibility. Since Polygon uses Solidity, which is the same smart contract language as Ethereum, anything deployed on Ethereum can also be easily deployed on Polygon. How easy is it you might ask? Think “copy+paste”. This is a huge advantage for Polygon as it has the lowest switching cost and a better developer experience for applications looking to move to another chain. So far, the DeFi ecosystem on Polygon has flourished and continues to grow. Polygon’s compatibility with Ethereum earned it second place in terms of ecological compatibility.
Flow and WAX are designed differently, so Ethereum developers cannot directly transfer resources and tools to their on-chain use. The token standards of these networks are also different, and combined with the lower security, the premium on their on-chain assets will be lower for the market, which we will discuss later. Neither currently has a cross-chain bridge for Ethereum, but we rank WAX higher than Flow in asset liquidity because its cross-chain bridge is under development.
The case of Immutable X is special. It is in the newly developed CAIRO programming language implemented by Starkware-built L2, which is not familiar to most developers. Also, existing code is not easy to port directly to it from Ethereum. But it communicates with Ethereum and uses the same token standard as Ethereum, so we label it “semi-compatible” in the image above. Regardless of where the NFT was originally created, whether on Ethereum, Polygon or Immutable X, assets can flow between them, albeit at varying speeds. From a technical point of view, Immutable can facilitate faster withdrawal of NFTs to Ethereum without compromising security, giving it an advantage over Polygon in terms of asset liquidity.
Regarding the compatibility of the ecosystem, we should note that, in fact, the composability in the NFT space is relatively low at the moment. This is for a variety of reasons, like NFT assets are more unique (they are unforgeable after all), and because there is usually not as much frequent/reliable pricing. When we talk about ecological compatibility, what we really focus on are those prominent NFT markets. If you’ve ever looked at the Yearn vault strategy chart, then you already know that composability plays a big role in DeFi. Polygon, which is as highly composable as Ethereum, demonstrates this well. It has rapidly formed an impressive DeFi ecosystem and amassed over $3.5 billion in liquidity. On the topic of eco-compatibility, this is certainly worth noting.
However, the growth of Polygon’s DeFi ecosystem may also be a double-edged sword for NFT projects. Applications migrating to Polygon will still end up competing for scarce block space on its PoS chain, which could dominate the chain if DeFi activity continues to grow rapidly. It ultimately depends on what the true maximum throughput of Polygon’s PoS chain is and how DeFi demand grows. This may not be an issue at all, but there is a chance that low value NFT activity will be priced as they are on Ethereum L1. Of course, NFT-specific activities can also be transferred to another Polygon’s scaling solution in the future. Compared to Immutable X’s scaling architecture, this is less of a concern due to its focus on NFTs and scaled batch processing efficiency, which in layman’s terms is more cost-effective the more transactions per batch.
Now that we can discuss each solution and their properties, let’s take a look at the scorecard. As shown in the chart below, we ranked these solutions based on a variety of key factors. A score of 5 represents the best choice in their respective categories, while a score of 1 represents the worst choice. It’s not hard to see that Ethereum dominates every category except throughput, which is where the strength of the alternatives lies. Of course there must be a degree of subjectivity involved, although we have tried our best to provide reasons. Below, we’ll go over each of these categories, what they mean, and what factors are considered in our scoring.
Throughput can be quantified, so the results are intuitive. The TPS of Immutable X can reach 9000, Polygon 7200TPS, WAX 4000TPS, Flow 100TPS, Ethereum 15TPS.
Next, let’s evaluate security. The Starkware-built L2 where Immutable X sits can provide security close to Ethereum, but it will be different, which is why it ranks second. Given its permissionless ~100 validating nodes, Polygon is in third place. Flow is fourth, albeit highly concentrated at the moment. As we mentioned before, Flow is likely to become more decentralized over time, and we believe (personal opinion) that the Dapper Labs team is more credible than the 21 validator EOS that WAX relies on .
**Wallets:** While it is relatively easy to add compatibility to wallets, it still has a significant direct impact on the user experience. Polygon ranks second here because it currently supports most wallets, although users need to do some additional configuration. Immutable X can support any Ethereum wallet with minimal burden on users, but since only MetaMask is currently available, we have to rank it third for now. We decided to put WAX ahead of Flow because they have built a very intuitive cloud wallet, and Flow still seems to only offer a custodial solution.
**Fiat Business:** Given that most people are not yet transacting in cryptocurrencies, access to fiat may be a priority for mainstream platforms. The ability to pay directly with a credit card is a major factor in the success of NBA Top Shot and why Flow ranks second. However, credit card payments can negatively impact the user experience due to chargebacks. Polygon ranks third in fiat business due to its liquidity interoperability with Ethereum. Considering the capabilities of its cloud wallet, WAX is in fourth place. We have to rank Immutable X last in this category for the time being due to its current lack of fiat-related business, but that will change soon.
**Developer Experience:** We evaluate developer experience based on how easy it is to build something. Many things can affect this, such as detailed documentation, available Github repositories, programming languages used, existing tools, etc. Ethereum (Solidity) is at the top, and Polygon (Solidity) is a close second given the strong EVM compatibility. According to the developers we interviewed, the ranking order should be Flow (Cadence), WAX (C++) and Immutable X (CAIRO). It’s worth noting that CAIRO is a very new language, and it should become more widely used over time.
Ecosystem compatibility refers to how easy it is for each chain to leverage existing building blocks, and how widely integrated that ecosystem is. Polygon’s EVM compatibility puts it in second place. Immutable X is next. As mentioned earlier, while it is not EVM compatible like Polygon, Immutable X is still able to benefit from the existing Ethereum ecosystem. EOS, while far from the Ethereum ecosystem, still has its benefits, and WAX can benefit from it. Flow doesn’t yet have the same type of open ecosystem or external market support, so it comes last.
**NFT “Brand Effect”: **We believe that existing brand power is an important factor in attracting new IP to a particular platform. So, given the huge success of NBA Top Shot and the other IPs in their track, Flow is second behind Ethereum. Immutable X is close behind, which has already attracted several strong gaming brands. Next is Polygon as it has been able to attract several DeFi blue chips and NFT projects like Aavegotchi . Lastly is WAX, which has failed to attract any influential brand power, save for the recent Topps MLB NFTs. WAX’s historically low volume (by purchase value) reflects that it primarily hosts cheap and lower-quality products, which directly results in them attracting less capital and market.
**Asset Liquidity:** Finally, we define asset liquidity as the ease with which NFTs can be transferred from one chain to another (eg, withdrawal to Ethereum L1). Technically, Immutable X could improve the liquidity of NFTs on Ethereum without sacrificing security. Next is Polygon, whose PoS chain NFT extraction can take up to 30 minutes. We put WAX in fourth place because they are actively building a bridge to Ethereum, which has been on their roadmap for a while. Flow’s plans for a two-way bridge are still unclear, so it’s last on the list.
**PS:** These scoring factors are not all comparable, not all are equally important, and some are more difficult to improve. For example, it is much easier for a solution to increase the wallets they support than to suddenly provide better security and greater throughput. The latter may require a complete overhaul and rebuild of the design architecture. With this in mind, we started to rank the factors themselves so that we could use weights to adjust previous scores. The final result is a more accurate scoring table as shown below.
Based on the above weights, we adjusted the scores and final rankings for these scaling options. Note again that these weights are subject to some degree of subjectivity, but we have done our best to make informed estimates.
As shown above, Immutable X ranked second in overall score, behind only Ethereum, mainly due to high throughput and good security. It excels in all of the most important and hardest factors to improve. Polygon is close behind. While Polygon didn’t get the best score in any of the factors, it didn’t get the worst score either. In all important respects, Polygon is a balanced solution without any major flaws in those areas. Next up is Flow, two key factors that made its NBA Top Shot so successful – its brand strength and its fiat business. Finally, there’s WAX, which lags behind in all but a certain throughput.
In this market, though, things change pretty quickly. As the chart below shows, Flow barely had any metrics that caught the market’s attention until January 2021, but has since hit the stage in surprising fashion. We are encouraged by the mainstream attention NFT has received, and we will continue to focus on this track as it continues to develop.
In the context of the NFT explosion, we are often faced with the question – “Do decentralization and security really matter that much?” This is an interesting question, especially when NFTs rely on knowledge possessed by centralized companies property rights.
Regarding decentralization, the trend in the past decade has been to gradually change from a middleman model that earns the difference to a user-led community model. People are beginning to yearn for those real (digital) property rights on open platforms, and centralized “walled gardens” pale in comparison. The emergence of trusted, neutral, and shared digital infrastructure has given rise to NFTs. It is this foundation, and the possibilities it brings, that make NFTs attractive and different from other previous forms of digital ownership. NFTs are actually the smallest unit of “shared internet” that can be used to express an amazing variety of digital items and give them their own history, provenance and more complex properties. We believe that the trustworthiness and neutrality of the networks that issue NFTs are the core drivers that make them valuable. These networks are attractive because they are owned by everyone at the same time, but no one really owns them. Does the market really value this attribute as much as we do? The chart below seems to reiterate their view.
To articulate why security is so important to brand reputation and users, just highlight the consequences of a lack of security. The lack of security can lead to manipulation and theft, as well as a loss of confidence in the future of the NFT space. For those big IPs who want to put 3A brands on the chain, the risks brought by insufficient security should not be ignored.
Ultimately, if NFTs do succeed in mainstream adoption, end users may not even know what the underlying technology is like. A good user experience actually encompasses all the intricacies we’ve just discussed. We hope the explanations in this article were helpful to you. Now that you know what to consider, have you thought about where to build your digital brand in the future?
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/ratings-of-nft-platforms-where-do-you-want-to-build-your-digital-brand/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.