In the last year, non-fungible tokens (NFTs) have become the most prominent buzzword in the crypto space. By the end of 2021, the cumulative trading volume of NFTs was more than $21 billion. This figure was 200 times more than the $120 million recorded before that year.
The number of people trading NFTs also increased significantly, growing from less than 1.3 million before 2021 to nearly 65 million by the end of that year.
By the second half of 2021, many big-name brands, such as Disney, Budweiser, Adidas, and Nike, were getting in on the NFT action. And as 2022 has progressed, it seems like more brands and companies will follow suit.
NFTs on Bitcoin?
For the longest time, the NFT market has almost exclusively been on Ethereum (ETH). Recently, other networks such as Solana, Polygon, and Flow have also grabbed portions of the NFT market for themselves. But what about Bitcoin?
Bitcoin (BTC) is considered the best, most decentralized digital currency layer. And slightly more than 1% of all BTC in circulation is issued as wrapped Bitcoin (wBTC), an ERC20 token representing Bitcoin on the Ethereum network. This means that there is a demand for using BTC in smart contracts.
Smart contracts are the principal means of creating and managing tokens on a blockchain.
However, unlike Ethereum, Bitcoin does not have smart contract capabilities. Therefore, it is impossible to natively run the codes needed to power NFTs on the network.
But a way around this weakness has been found. Using smart contract layers such as Stacks and Counterparty on top of the Bitcoin blockchain adds full smart contract functionality directly to the Bitcoin network. In this way, it becomes possible to trade BTC for NFTs, decentralized finance (DeFi) products, and other crypto assets.
In this short read, we look at a few of the new technologies that are helping grow the popularity of Bitcoin-secured NFTs.
This is a BTC sidechain that can be used to facilitate the trading of Bitcoin-secured NFTs. The platform is more secure than the Bitcoin main net and often comes in handy for traders interested in greater privacy than the BTC network can offer.
The Liquid Network replaces proof-of-work miners with trusted, known functionaries to process transactions. This mechanism allows for faster transactions and improved privacy.
Liquid can be used by players of play-to-earn (P2E) games such as Lightnite to buy in-game items in the form of Bitcoin-secured NFTs.
Lightnite players can receive unique Liquid tokens whenever they buy skins or other assorted in-game merchandise. The tokens can either be traded with other Lightnite players or withdrawn from the game and stored in personal wallets using the Liquid Network.
Stacks is a decentralized, open-source, smart contract-capable network built on top of the Bitcoin blockchain. Despite being a Layer-1 (L1) blockchain, Stacks works similarly to Layer-2 (L2) scaling solutions on Ethereum; it rolls up all its transactions and settles them on the BTC network.
Bitcoin has all the core features needed to build decentralized apps (DApps) and NFTs: security, capital, settlement assurance, and network effects. Stacks’ smart contract capabilities allow it to power NFTs backed by the liquidity and security of the BTC network.
And since most of the work on Stacks is performed outside of the Bitcoin main net, its transactions are quicker, less expensive, and use remarkably less energy.
Given Ethereum’s exorbitant gas fees, Stacks is quickly becoming a more cost-effective platform for NFT trading. Developers are increasingly minting NFTs and building marketplaces secured by the power of the BTC blockchain.
Examples of NFT projects emerging in the Stacks ecosystem include:
- StacksArt: is the first fully-fledged NFT marketplace on the platform.
- STXNFT: a hub for the globe’s Web3 NFT-based social identity.
- Boom: is a platform where users can stake Stacks’ native token, STX, and receive NFTs.
Meanwhile, Brian Laughlan, the developer of a Bitcoin-based NFT collection on Ethereum known as Satoshibles, is working with Stacks to port more than 5,000 NFTs from Ethereum to the Bitcoin network.
The decision to build a bridge between Stacks and Ethereum was influenced by the bitcoin community’s desire to store their Satoshibles on the Bitcoin network instead of Ethereum.
Satoshible NFTs are based on the photos of Dorian Nakamoto, the man who back in 2014 was alleged to be the pseudonymous Satoshi Nakamoto, founder of Bitcoin.
The Stacks ecosystem is still relatively small, with the most transacted NFT collection on the platform being Bitcoin Birds. The Bitcoin Birds project was developed by a 12-year-old boy named Abraham Finlay.
Stacks also has a knock-off version of CryptoPunks, the popular Ethereum NFT project, cheekily dubbed StacksPunks. StacksPunks has so far generated almost $3 million in trading volume.
Scarce City is a Bitcoin-secured NFT marketplace that enables crypto creators to sell their works via Lightning-powered auctions. The people behind the platform believe that Bitcoin’s best products ought to be traded according to the blockchain’s core properties of anonymous, borderless, permissionless, trustless, and verifiable authenticity.
Apart from enabling creators to sell physical art for BTC, Scarce City is also famous for its Rare Pepe Collection. This is a set of NFTs based on the popular internet meme, Pepe the Frog.
Rare Pepes, which came into existence way before the current wave of NFTs, are powered by the Counterparty protocol. This open-source platform is built on top of the Bitcoin network and uses the Bitcoin blockchain to record data.
For more recent transactions, most Rare Pepes were wrapped and ported to the Ethereum network. In September 2021, a Rare Pepe piece sold for almost $700,000 worth of ETH.
Bitcoin-secured NFTs could theoretically last longer than those secured on much newer blockchains, which may disappear in the not-too-distant future, given the volatility in the crypto space.
While putting NFTs on Bitcoin is still a novel idea, that edge could be advantageous. Bitcoin is the most valuable digital asset by market cap, and its most ardent supporters have been known to shun all other cryptocurrencies and their networks. Paired with the scalable tech on platforms like Stack and Liquid Network, it might help these Bitcoin-secured NFTs stand out in an increasingly crowded market.
And as the NFT market grows, we could see more funds flowing into non-fungible tokens, especially when collectors trust that Bitcoin secures their NFTs.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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