Solana is the second most used cryptocurrency and blockchain to mint and trade NFTs, only behind Ethereum.
Although the concept of the Solana blockchain is comparable in functionality to other NFT compatible blockchains such as Ethereum and Polygon MATIC, it differs significantly in design, fees and uses.
Having researched Solana in full, including a deep dive into the full extensive whitepaper, it’s clear now how Solana intends to take over the crypto, NFT and DeFi space.
NFTs that have been minted on the Solana blockchain, using its cryptocurrency SOL, are no different in design or potential utility and reward than other blockchains such as Ethereum. The key differences include where Solana NFTs are traded, as well as different fee values.
To understand what Solana NFTs are, it’s key to understand what Solana is, how the Solana blockchain works and why someone would choose to mint and trade their NFT collections using Solana than other NFT trading cryptocurrencies – all of which we are going to cover in this article.
What is Solana
Solana is a blockchain technology created in 2020 using a concept set out by Anatoly Yakovenko.
Like most blockchains, it is supported using coins and tokens. In Solana’s case its cryptocurrency is known as SOL.
SOL can be used for several different purposes including general trading as a cryptocurrency but due to its incredible high-volume capability and very low fees it became a popular blockchain and cryptocurrency to trade NFTs in.
So much so it is now the second most used NFT blockchain only behind the huge Ethereum network, although it is worth noting that in early 2022 Solana achieved a significant accolade of having more NFT trades in a single day than Ethereum.
Considering Ethereum’s huge dominance and market share of NFT trades, this marked a significant step towards Solana becoming the most used cryptocurrency for NFT trades.
In late 2021 gas fees on the Ethereum network rose to an average of $250 a trade but could increase significantly more during peak time to over $1,000 a trade.
In comparison the gas fees on Solana to mint an NFT are on average 1 cent.
It became hard for Solana to increase its market share, despite the incredible savings offered due to Ethereum’s early dominance and being recognized as the blockchain to go to, partly due to large blue chip NFT collections such as Bored Ape Yacht Club and Crypto Punks on OpenSea already using it.
How does the Solana Blockchain work
To fully understand the concept of Solana NFTs, it is important to understand how the Solana Blockchain works.
Having read all 32 pages of the incredibly technical Solana Whitepaper, I want to condense this down into an easy-to-read explanation within a couple of paragraphs.
My intention is to make it at least enough to understand the basics of the Solana blockchain, and the NFTs it stores.
So, what is a blockchain?
A block is simply a file of data. The data could be anything, but usually for NFTs it will be data of a mint, smart contract, or transactions of who bought and sold what.
Each block can only hold so much data. Once the block is filled it needs to be validated and connected to other blocks of data in the network using a process of mining.
One block of data is connected to another, the last entered block of data, in the Solana network creating a chain of connected blocks, hence the phrase ‘the Blockchain’.
There are a lot of complex mathematical and algorithmic activities going on behind the scenes to make all this happen but the core difference between the Solana blockchain and other blockchains is that it uses a Proof of History algorithm, rather than Proof of Stake algorithm as used on Ethereum.
I won’t go into the technical complexities of this, but rather simplify the concept by saying the Proof of History algorithm, which can accurately process and validate transactions using an accurate timestamp, means it can work much faster than Ethereum.
This additional speed helps it to be able to carry out 710,000 transactions per second compared to Ethereum that can only manage 25 transactions a second.
This speed, and the reduced fees on the Solana network, help ensure the gas fees for those trading Solana NFTs is kept incredibly low.
On the other hand, the low transaction fees on Solana create other negative effects, which we will cover later in this article.
How are Solana NFTs created
Like all NFTs, the Solana NFTs are created by a process of minting.
Minting an NFT simply means creating it and storing it on the Solana blockchain.
To do this the NFT creator would have written a small program of code, called a smart contract, and stored this on the Solana blockchain.
When a buyer wants to own one of the NFTs in the collection they will pay the creator in SOL cryptocurrency, and this action connects to the smart contract and literally creates the NFT then and there.
The NFT is given a unique address and its details and data are stored on to one of the data blocks that we spoke of early by the miners and is then validated by Solana network validators. Once approved the block is connected to the Solana blockchain forever more.
This unique address is connected to the NFT which allows the owner to see or trade their Solana NFTs on secondary marketplaces such as Magic Eden.
To highlight the potential of Solana NFTs it is worth noting that through a series of fund-raising Magic Eden now has a company valuation of over $1 Billion!
Why are Solana NFTs different to Ethereum NFTs
The main difference between Solana NFTs and Ethereum NFTs is the blockchain networks they are created on.
An NFT, or Non-Fungible Token to give it its full name, is data file of what the NFT is and its unique address. This applies across both the Solana and Ethereum blockchains.
The main reason why people believe Solana and Ethereum NFTs are different is down to the way they are displayed, traded and which digital wallet is used to mint and trade them.
OpenSea was the first NFT marketplace to appear and they originally listed only NFTs created on the Ethereum blockchain, which includes publicly known collections such as BAYC.
Trading Ethereum NFTs is done through a digital wallet, and the most used wallet for Ethereum NFT trading is MetaMask.
As the NFT industry took note of Solana’s capabilities to be able to handle NFTs, we saw many NFT collections appear on the Solana blockchain.
As though this was a different blockchain altogether it required a compatible digital wallet and NFT marketplace.
The Phantom wallet is the most used digital wallet for trading Solana NFTs, and Magic Eden is the most used Solana NFT marketplace.
To explain this a little further let’s use a game console analogy.
The two most popular games console on the market today are Playstation and Xbox. To play an Xbox game you’ll need an Xbox console.
It isn’t possible to play an Xbox game on a Playstation console and vice versa.
Just because the games look different, can be bought in different online stores (Xbox and Playstation direct game stores) and are not compatible with each other, doesn’t mean the games are necessarily much different. Both consoles can play similar games and have similar graphics and gameplay.
Just because Solana NFTs and Ethereum NFTs use different marketplaces and are bought using different digital wallets and different cryptocurrencies, it doesn’t mean the NFTs need to work any differently.
Are Solana NFTs better than Ethereum NFTs
Although NFTs on both the Solana and Ethereum blockchains are predominantly the same, using Solana for NFTs has some advantages.
The main advantage are the low gas fees.
Buying and selling Solana NFTs can be done with even low value NFTs, without the concern of wiping out any profits with volatile and high gas fees, which is a huge concern on the Ethereum network.
It is possible to make multiple $10 profit NFT trades on Solana whilst paying 1 cent or less in transaction fees.
Trading NFTs on the Ethereum blockchain for $10 profit margins wouldn’t be possible as it would cost more in gas fees than the return made.
It isn’t just the cost to buy and sell NFTs. but the cost to mint them too.
On the Ethereum network complex coded NFT collections with multiple traits, accessories and utilities have seen single NFTs costing more than $500 to mint ion fees alone!
I have seen many times the gas fee on the Ethereum network being higher than the cost of the NFT itself.
This simply wouldn’t happen on the Solana blockchain.
Despite the steadily growing number of NFTs on the Solana blockchain it has yet to convince major brands to adopt its blockchain over Ethereum.
OpenSea in summer 2022 began started opening its doors to Solana NFTs.
With its low fees, transaction capabilities and being able to be traded on OpenSea, it may be enough for blue chip collections to stop using Ethereum in favor of Solana.
The Negatives of Solana NFTs
Although everything we have covered so far highlights many of the positives using the Solana blockchain, there are some negatives too.
The reason Ethereum have the high gas fees they do is in part down to low transaction capabilities meaning in peak times there is far more demand than supply, and with a variable gas fee it pushes gas fees up astronomically – but another reason for the high gas fees is for security.
Blockchains are open to bot and spam attacks all the time. Some attacks are designed to bring down the network or infiltrate the network to steal cryptocurrency or its assets.
This means for someone to carry out a bot or spam attack on the Ethereum network would be very expensive to do. Gas fees need to be paid whether the transaction comes from a user or a bot.
To bring down a blockchain network this way would take hundreds of thousands, or millions of transactions in a short space of time. Costing a small fortune.
This is one way the Ethereum network protects itself.
With less than one cent transaction fees, it means the Solana network is more open to attack and has been taken down more than once by bots and spam attackers.
The Solana team are working behind the scenes to make the Solana blockchain more secure.
As well as spam and bot attacks, the Solana network has gone down several times for multiple hours at a time over the past couple of years, most recent in May 2022 which was due to a bot attack and again in June 2022.
Why chose Solana for NFTs
The Solana NFT space is a thriving ecosystem with thousands of NFT collections.
Although many collections do not come from huge brands, there is a combination of great art and NFTs with utilities, as well as play2earn games.
The low trading fees makes it attractive to enter the Solana NFT market with a small budget.
For example, four NFTs could be bought on Solana for less than 4 cents in fees but likely to cost $100 or more in fees on Ethereum.
One of the biggest reasons to consider Solana for NFTs is the fact OpenSea is now allowing Solana on to its platform.
Many blue-chip collections didn’t necessarily choose Ethereum over Solana due to the blockchain but did so because of the popularity and dominance of OpenSea as a positive NFT based marketplace brand.
They feared appearing only on marketplaces such as Magic Eden or Solanart which have yet to reach mainstream media or the number of users OpenSea has.
Magic Eden’s growth is though being noticed. Not only by the investors who have turned this once small marketplace in to a billion-dollar company, but also by mainstream media who are seeing the bigger picture in the NFT industry.
This will also be helped along by Instagram, who has already confirmed it will allow NFT holders to showcase their NFTs on their platform and have already confirmed this will include Solana NFTs, giving it much more publicity and awareness than it has now.
As OpenSea welcomes more Solana NFTs, the low gas fees may be a big enough factor for more larger brands to use Solana instead of Ethereum, which will not only positively impact SOL, but also the entire Solana NFT space.