NFTs have surged in popularity in the last couple of months. From artists to celebrities and musicians, creators are taking NFTs to new heights every day. However, it’s time to focus on further decentralization.
In the first quarter of 2021, the sales of NFTs crossed $2 billion—over 20 times higher than the previous quarter. This figure does not include sales of NBA Top Shots which amassed $472 million in the first quarter. It has also excluded Beeple’s record $69 million NFT sale as it was traded in partnership with Nifty Gateway.
However, for the NFT market’s continued success, it needs a “more decentralized environment,” Pavel Bains wrote in an article for Coin Telegraph. Bains is the CEO of decentralized storage network Bluzelle.
Why NFTs need further decentralization
As the NFT market grows, more people will move to “highly decentralized blockchains.” Compared to centralized solutions such as Rarible, OpenSea, and, Binance NFT, decentralized platforms offer higher transparency and flexibility, Bains wrote.
“A decentralized database can provide users streamlined access to a data delivery network that ensures a high level of protection from data breaches, network failures and performance troubles — all issues that currently plague the global NFT ecosystem in a big way,” Bains added.
Currently, many developers rely on centralized databases, including ones provided by Amazon Web Services and Microsoft. These databases, Bains wrote, involve a “centralized point of failure.” This means that they are vulnerable to various third-party threats.
For instance, in March, several NFT owners of marketplace Nifty Gateway reported that their accounts were compromised. Following the breach, hackers stole NFTs worth thousands of dollars from their accounts.
Now, Ethereum is a well-established decentralized platform on which most NFTs have been built. However, the increasing gas fees (or transaction fees) are a significant concern. Early this year, the transaction fees had reached a record high, crossing $20 for the first time. In addition, the platform has also been facing congestion issues.
NFT market is expected to grow rapidly
NFTs have been here for years. However, it is only this year that their popularity skyrocketed and it began garnering mainstream appeal. While the industry is still evolving, the market is expected to grow rapidly.
The high transaction volumes of some of the major NFT marketplaces also indicate the growing interest in the space. Opensea, for instance, witnessed its transaction volume going up by 1400% since January this year. Meanwhile, Rarible’s transaction volume grew by 634%.
As more mainstream artists and celebrities discover NFTs and begin dropping their own creations, their popularity is going to soar. Similarly, more platforms are coming up for creators to build and sell their NFTs. Decentralized storage service Filecoin recently launched a free NFT storage platform. The platform allows users to store their NFT data on decentralized networks for the long term.
However, as competition increases, it’s imperative that these platforms address the existing issues in the industry. Addressing the security flows and adopting a decentralised database could be the key to staying ahead in the game.
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This article is educational material.
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