Let's mint some NFTs
This week we’re talking about NFTs — that’s right, non-fungible tokens and we’re joined by Mikeal Rogers, who’s leading all things InterPlanetary Linked Data at Protocol Labs. We go down the NFT rabbit hole on a very technical level and we come out the other side with clarity and a compelling use of NFTs.
Matched from the episode's transcript 👇
Mikeal Rogers: It’s a whole ecosystem. There’s a bunch of other blockchains as well, there’s chains that are very compatible, versus ones that have some difficulty with compatibility… It’s important here to separate what is a technical limitation because we just haven’t figured out what to do yet, but there’s an incentive to fix it, versus issues that are actual incentive problems. The players in this industry don’t want to do this, so it’s not going to happen. There have been things floated to do in Bitcoin that would be good for the people that use Bitcoin, but maybe not good for the miners… So that stuff in Bitcoin is probably not gonna happen, and may happen in some of these other chains that are being created.
Transaction fees - there’s nobody who wants all the transaction fees to be super-high, actually. The business model here is to mine new tokens, and the utility of those tokens is somewhat affected by how difficult they are to transact… So there’s a real incentive to try and get that down over time, rather than up, because that’s just not where you’re making money; nobody is making money on that. They wanna get it down.
The same thing with the power consumption. Nobody wants to pay extra power bills. Everybody’s trying to get the power consumption down. It’s just literally a technical problem that we’re iterating towards.
And Flow, for instance, like we just talked about, and NEAR Protocol for that matter - they already use proof of stake, and use way less power, and they have much lower transaction fees. Not because of that… Because of other reasons, mostly.
Anyway, if you look at the ecosystem as a whole, you don’t really have a transaction fee problem because you have all these other chains that you can use that have very low transaction fees… And if an asset gets to a certain price, you can actually move it to Ethereum. And not every protocol has worked out exactly what this is, but one of the really popular things right now is called Polygon; it’s the sidechains that are Ethereum-compatible, which means that they look more or less like Ethereum. And so if you ever want to transfer an asset from there to Ethereum, you can.
So there you can create assets for sub-penny, do all these transactions, and if some of them get to be like a million dollars and you really wanna put them in the more secure, stable, broadcasted network, you can then move them to Ethereum and pay that transaction fee. And I think the way to look at this evolving is that the way that you have to scale it is through more decentralization, not more centralization. So the solution is not to get everything into Ethereum and make Ethereum so good that it has sub-penny transaction fees, and is doing a billion ops a second, or something; that’s not realistic. It’s fine to just have these sidechains and to have the assets move around.
Protocol Labs, Juan Benet who started the company - he’s always had a lot of vision about how this stuff works in the future and about this protocol interop, and we’ve been working on standards and protocols that are just open source, open protocols that we implement. A lot of people, I think, for a long time, thought that we were over-engineering. They tended to be like “Oh, why don’t you just do your own custom thing, like we’re doing over in this chain?” And we were like, “Because it’s not about your chain, it’s about the compatibility between the things”, right?