Paving The Road For Next-Gen NFTs With Metadata Sidechains

By November 24, 2021NFT
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Co-CEO at Fluree, the scalable semantic graph database backed by blockchain technology.

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The market for non-fungible tokens (NFTs) has skyrocketed. Yet, the blockchain-inspired technology is scratching the surface of what might be possible. Improvements in the way NFTs are created, stored and indexed promise to accelerate this boom in digital collectibles. This enables new types of NFTs that combine digital assets, business logic and data taxonomies.

For a bit of background, NFTs are a popular way to represent the ownership of digital assets like art, music or moments in sports video. In some respects, they are the modern equivalent of baseball cards. Blockchains provide a digital paper trail for certifying ownership and authenticity of the assets. Most NFTs are currently stored on top of the Ethereum blockchain platform.

This could soon change with a recent technology upgrade to the Cardano blockchain, a promising competitor which was co-founded by one of the original Ethereum founders. Cardano backers are also investing $100 million to grow out the ecosystem of distributed apps, including NFTs.

NFT Explosion

The first NFT was introduced in 2014 as an experiment to demonstrate how the blockchain could certify ownership of digital goods. The market exploded this last year, with sales of $2.5 billion in the first half of 2021, and one of the leading markets, OpenSea, saw sales of $2.9 billion in September.

Ethereum is the blockchain of choice used in six of the top 10 NFT marketplaces. However, this could change with a recent update to Cardano that supports NFTs. Cardano has grown in popularity as an Ethereum alternative. The new update allows developers to roll out new NFTs at significantly better performance and cost than Ethereum.

Next-generation blockchain communities, including the Cardano community, are finding new ways to improve support for NFTs. Metadata sidechains allow opportunities for this nascent market exchange to proliferate, thanks to better data management and support for data schemas.

Storing Digital Assets

All NFTs need to store the digital assets referenced in the blockchain somewhere. In theory, this could be any cloud storage service under the control of the marketplace, a sports league or the artist. But this runs the risk that the media the NFTs point to changes after the fact. A hacker might sabotage the app server storing the asset.

In other cases, an artist might change their mind. This is precisely what happened with the Rug Pull NFT, in which one artist sold a variety of digitized portraits and then retroactively replaced the original content with pictures of rugs. This ended up being a commentary on one of the core challenges NFTs face.

As a result, most NFTs point to data stored using interplanetary file systems (IPFS). Although many alternatives have been proposed, IPFS remains one of the most popular approaches. Most recently, IPFS backers created a blockchain-backed service called Filecoin that rewards participants for providing storage as a service at about 0.03% of the cost of AWS and with no data egress charges.

The Challenge Of Logic

However, IPFS lacks the most basic file management features developers and users are accustomed to, like Mac’s Finder app, and the actual file is static. Sure, it’s possible to download the file, update it and then upload it back. But this violates the notion of the NFT providing an immutable chain of ownership of the original digital asset.

The static nature of existing file storage approaches limits the ability to experiment with different kinds of business logic. For example, what if various artists wanted to license digital assets like musical chords, guitar riffs and lyrics in a way they could be recombined into new artworks? The existing NFT architecture doesn’t provide royalties to all the participants that contributed to a final product.

One vision of next-generation NFTs is providing the ability to combine and mutate raw content to support different kinds of licensing and revenue models. This creates an economy that allows people to evolve and facilitate cooperative ownership of these assets. Replacing a static file system with a decentralized database enables new types of businesses and sharing arrangements.

Building For Search

Down the road, NFT developers need ways to make it easy to find content that may exist across multiple marketplaces. Today there are a few winners across specific broad NFT categories and specialized domains, but it isn’t easy to find these items outside of their respective marketplaces.

This mirrors a similar problem search engines faced in the early days of the web. Eventually, leading providers like Yahoo, Google and Microsoft led the development of schemas for characterizing the metadata about the information on a website. This made it easy to distinguish pages about insect beetles from the Beatles. It also made it easy to characterize elements like product prices, store hours and genres to improve the presentation of search results.

Similarly, semantic standards could improve the search for NFT across marketplaces. The adoption of standard naming conventions for the properties of NFT will unlock the potential of the entire blockchain ecosystem.

Building New Business Models

The future lies in creating metadata sidechains that simplify the integration of databases, naming schemas and business logic into next-generation NFTs that run on the Cardano blockchain. Forward-thinking innovators are working on tooling that will allow developers to start creating decentralized apps.

This will make it easy to spin up a database, create a smart contract and deploy it onto the Cardano blockchain. The goal is to make it easier for a developer to implement more sophisticated apps without stitching everything together manually.

Perhaps shortly, developers will look back upon the first generation of NFTs as a proof of concept. The next generation of NFTs will make it easier to explore different business models for collaborating, sharing and funding NFTs.

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