Top 3 Blockchains for NFTs in 2024

The NFT marketplace has grown rapidly in 2021 by 21000% and later started reducing in value in 2022. Regardless of the market conditions, NFTs have some real-world use cases and will continue to be used.

However, there are many decisions to make when entering the NFT market. If you are unsure how to start with NFT minting, read to learn about what you should consider before starting to mint NFTs. The first decision in creating an NFT is choosing a blockchain, but hundreds of blockchains exist.

This article will explore some of the blockchains used in the NFT market and essential factors to consider when choosing one. 

Critical factors to consider while choosing a blockchain

These include:

• Security
• Scalability & transaction costs
• The volume of NFT and other transactions

No categorization is perfect, and among our categories, security and scalability are interrelated; a blockchain with security issues will have difficulty scaling. However, to be able to analyze different aspects of the blockchain separately, we will consider all security-related factors first. Then, we will focus on scalability in our assessment of blockchains without taking security into account.

Volume

While volume data is quantitative, some of the other factors are qualitative. Therefore, we will use volume data to filter blockchains and focus on the top ones.

Below you can see a score combining the NFT volume and crypto volume into one metric, “Overall Score.” This is our initial attempt at creating a single score to help us prioritize the top 3 blockchain candidates to examine. We will improve this score over time by including additional relevant data points:

* Based on 30-day NFT trade volume by a chain from Cryptoslam on 12/05/2022.

** Based on 30-day volume from CoinMarketCap on 17/05/2022.

*** Combined score is calculated by Multiplying 30 Day NFT volume by 30 Day crypto volume and dividing it by a constant to make the number easier to interpret. This score aims to combine two important aspects in trading an NFT on a blockchain: 1) Blockchain’s overall popularity and blockchain’s popularity in NFT sales.

**** NFT volume is based on NFT trade volume provided by Stacks On Chain and STX close price provided by Binance. Every Stacks transaction is anchored in the Bitcoin blockchain, which is why Bitcoin volume is used for the 30-day crypto trading volume column.

****** It is not possible to buy Palm tokens; they are distributed to the Palm blockchain users and creators.

 ****** Panini is a private blockchain that does not have a token; the transactions are done with a credit card or PayPal.

Security 

Security is an important concept when choosing a blockchain; it is influenced by its consensus mechanism. Stacks blockchain provides the highest security.

Stacks

Stacks powers smart contracts for Bitcoin. Stacks blockchain uses a unique consensus mechanism called proof of transfer (PoX). PoX allows a new blockchain to be created using proof of work of an existing blockchain (anchor) which can have different rules than the PoW blockchain. This provides the anchor security (Bitcoin, in the case of Stacks) without needing to change the anchor blockchain. 

Figure 1. How does Proof of transfer work? 

Stacks can leverage the security & decentralization level offered by Bitcoin Proof of work. Proof of work is a consensus mechanism in which miners compete with each other to solve a math problem; whoever solves the problem first will be able to update the blockchain with the latest transaction and will receive Ethereum. 

In a PoW mechanism, 51% of computing powers and nodes must be in the hands of hackers or frauds to be able to take over the system but to do that, they must pay for the hardware devices and electricity to run them, which makes the probability of a 51% attack almost zero. 

Ethereum 

Ethereum uses a proof of work (PoW) mechanism, but it plans to move to the proof of stake (PoS) mechanism with Ethereum 2.0. Validators stake their cryptocurrencies and can validate transactions based on how much they have staked. Currently, to become a validator in Ethereum, 32 ETH must be deposited. If someone controls 51% of the nodes, they will be able to influence the system, but given the Ethereum blockchain size, the required investment will be very high, which makes this type of attack unlikely. PoS has a lower entry barrier compared to PoW, and there is almost no ongoing cost associated with it. This makes it less secure when compared to Bitcoin. 

Solana

Solana uses proof of history (PoH). PoH has evolved from PoS. It cryptographically determines the time that elapses between two events, and after that, a timestamp is assigned to each transaction so its order can be tracked. 

This mechanism was first used by Solana and has not been put up to test on a large scale, so potential security risks can exist. For example, In September and December of 2021 and January 2022, Solana experienced a distributed denial-of-service (DDoS) attack that adversely affected its performance. The Solano blockchain has been subjected to a temporary and significant shutdown. So far, in 2022, it has recorded a total of 11 outages which include two significant outages. 

Scalability & transaction costs

Scalability in a blockchain refers to how many transactions a blockchain can process in a certain time frame. Transaction costs (gas fee) in a blockchain refer to how much fee should be paid to the blockchain to make a transaction. Solana is the most scalable one and has the lowest amount of fees. 

Solana

Solana was created with the idea of scalability in mind. Solana’s transaction per second is relatively higher compared to other blockchains. It usually handles more than 2000 transactions per second, and theoretically, it can handle more than 750,000 transactions per second. 

Transaction costs are meager in Solana(around $0.00025 per transaction) compared to other blockchains due to its higher block size and faster block-creating time. It can make blocks faster (every 400 milliseconds) and fit more transactions in each block. 

Stacks

Stacks improve the Bitcoin block processing time by using microblocks that enhance the transaction speed, reducing it from the 10 minutes it takes on the Bitcoin blockchain to mere seconds.

Stacks enable smart contracts and programmability on top of Bitcoin. Stacks can theoretically do 1.67 Million simple transfer operations per day, and add-on layers on Stacks blockchain can help it to scale further.

Figure 2. Stacks microblocks transactions with Bitcoin blocks 

Transaction costs on Stacks blockchain are considerably lower than transaction costs on Bitcoin & Ethereum but more than Solana. The 2022 May average daily transaction cost on stacks blockchain was around 0.05$.

Ethereum 

One of the main limitations of the Ethereum blockchain is its scalability. There are too many users for Ethereum-based applications, and the volume of transactions is more than what it can handle efficiently. Ethereum can manage 13-15 transactions per second, ~1.1M transactions/day, and more than 1 million Ethereum transactions are happening daily. This has led to capacity bottlenecks. 

Ethereum users have to pay a transaction fee called a gas fee to transact on the Ethereum blockchain. A total transaction fee is calculated using the following formula: 

Gas units (limit) * (Base fee + Tip)

• The gas unit (limit) is the maximum amount of gas a user is willing to pay for the transaction. The complexity of the transaction determines the unit requirement. 
• The base fee is the minimum amount of gas required to add the transaction on the Ethereum blockchain. The Ethereum network determines the base fee and changes based on the demand. The base fee is burned after the transaction.
• Tip: The tip is paid to the miners. Miners prioritize transactions with higher tips. 

When the demand is high for transacting, gas fees increase due to the higher base fee and users can pay higher tips to prioritize their transaction, leading to a higher total transaction fee. For example, when Time magazine sold its NFT collection, the investors paid more in gas fees than the actual value of NFTs. 

High transaction cost is a significant downside for the Ethereum blockchain. It discourages Artists that can not afford to pay it to mint NFTs. 

* Based on the consensus mechanism protocol. Source: Medium.

** Based on 30-day volume from CoinMarketCap on 17/05/2022.

*** Based on 30-day NFT trade volume by chain from Cryptoslam on 12/05/2022.

**** Average transaction cost based on the Last 30-day transaction cost on 09/06/2022, Source:Stacks on Chain. Every Stacks transaction is anchored in the Bitcoin blockchain which is why Bitcoin and STX volume is used for the 30-day crypto trading volume. 30-day NFT trading volume is based on NFT trade volume provided by Stacks On Chain and STX close price provided by Binance on 12/05/2022.

***** average transaction cost source: Solana Beach on 09/06/2022

******Based on the Last 30-day transaction cost on 09/06/2022. Source for Ethereum: Messari. 

Further reading

• A Guide to Oracles : What Are They, Types & Use Cases
• 8 Factors to Consider Before Buying NFTs
• NFT Standards of Top Blockchains