What are Compressed NFTs in Crypto? Beginner’s Guide 2024
Compressed NFTs (cNFTs) offer a cost-effective solution for creating NFTs in the crypto world.
They're like a streamlined version of traditional NFTs, with data stored off-chain, reducing costs.
Created through a collaboration between Solana Labs and the Metaplex Foundation, they're changing the NFT landscape.
The process involves "account compression" and "Bubblegum" to validate and store data securely.
Use cases include gaming, music, events, and the metaverse, with significant cost savings.
Data for cNFTs is stored off-chain, and monitored by "indexers," reducing costs while maintaining security.
Compared to regular NFTs, cNFTs save up to 99.9% in minting costs, making them a game-changer.
In a rapidly evolving crypto world, cNFTs open up new possibilities for creators and businesses across various industries.
Tired of constantly seeing the word ‘Compressed NFTs’ trending in Web 3.0, yet not able to understand what compressed NFTs are in Crypto? Don’t worry, this article is written just for people like you. Learn about Compressed NFTs, how they work, who created them, and much more in just 5 mins.
What are Compressed NFTs in Crypto?
Remember NFTs? Those rare, one-of-a-kind digital art or exclusive in-game items. They’re making waves in the crypto world again.
As you know, the traditional creation of NFTs can be costly, especially on blockchains like Ethereum or Solana. This is because every bit of data is recorded on the blockchain itself. This process can make the creation of NFTs expensive, limiting their accessibility.
That's where Compressed NFTs, or cNFTs, come into play.
They offer a more cost-effective and scalable approach to NFT creation. The "compressed" part is the key here. Unlike traditional NFTs, cNFTs compress their data and store it off-chain.
It's like putting some of your stuff in a storage unit instead of keeping it all in your already crowded living room.
This off-chain storage reduces costs and makes cNFTs more affordable to produce in large quantities.
Who Created Compressed NFTs?
Compressed NFTs are a collaborative effort between Solana Labs and the Metaplex Foundation. Solana Labs, the brainchild behind the Solana blockchain, created a program known as account compression (a process that enables the creation and management of Compressed NFTs).
Metaplex, on the other hand, is responsible for compressed NFTs through its program called Bubblegum. Bubblegum is responsible for verifying the metadata associated with an NFT.
Metaplex is an exciting team that emerged from Solana Labs, focusing on setting NFT standards for the Solana blockchain. Since its inception in 2021, Metaplex has facilitated the creation of over 22 million NFTs, generating a whopping $3.36 billion in NFT sales.
This collaboration between Solana Labs and Metaplex has brought about a revolutionary concept that's changing the way NFTs are created and distributed.
How do Compressed NFTs Work?
Understanding how cNFTs work is essential to grasp their significance. Instead of storing all the data on the blockchain itself, cNFTs employ a clever approach.
Here's how the magic happens:
Imagine building a digital NFT collection, like a gallery of unique digital art.
Metaplex's ‘Bubblegum program’ makes sure each NFT in your gallery is genuine and has the correct information.
Bubblegum then works with another tool called ‘account compression’ to add new NFTs to your collection. Think of it like adding new artwork to your gallery.
All these changes and new NFTs are carefully recorded on the Solana blockchain, a secure digital ledger. This way, everything is transparent and safe, just like keeping a record of your valuable digital art collection.
To ensure everything goes smoothly, there are special tools called ‘off-chain indexers’. They act like a vigilant security team, watching over your NFT collection and making sure it's well-protected.
What are the Use Cases of Compressed NFTs?
Now that you understand how cNFTs work, let's explore their diverse applications:
Gaming: Compressed NFTs are the perfect in-game assets for web3 games, saving costs and enabling millions of unique in-game items.
Music and Events: They offer cost-effective digital tickets/collectibles for concerts and events, providing both security and authenticity.
Metaverse: Compressed NFTs help digitize in-game collectibles, enhancing the metaverse experience for millions.
Where are Compressed NFTs Stored?
You might be wondering where all the data for compressed NFTs is stored.
Data Storage: Think of the information about your digital collectibles (cNFTs) as a collection of digital items, like artwork. This information is kept safe outside (off-chain) of the main system, by using a service called ‘Solana RPC Provider’. Kind of like storing your artwork in a secret room.
Monitoring: There's a special system called ‘indexer’ that acts like a security camera and keeps a close eye on any changes or updates made to your digital collectibles.
Cost Saving: Keeping this information outside (off-chain) the main system is more budget-friendly.
Essential Record: Even though most of the information is kept outside, a small but essential part is still securely stored inside (on-chain) the system. It's like keeping a key piece of information in a safe place while the rest is stored in your secret room.
Compressed NFTs vs Regular NFTs
Now, you might be wondering how cNFTs differ from regular NFTs.
Well, think of compressed NFTs as the streamlined, cost-effective version of their traditional counterparts.
Here's the main difference:
Compressed NFTs: These are like the minimalists of the NFT world. They keep their essential information off-site, in the off-chain storage unit, which is cheaper.
Regular NFTs: On the other hand, regular NFTs keep everything on-chain, which can be pricier. It's like having a fully furnished, but somewhat cramped, living room where everything is on display.
How much money do compressed NFTs save?
Let's talk numbers. To mint 1 million conventional NFTs, would cost roughly 12,000 SOL (Solana's native cryptocurrency).
Now, minting the same number of compressed NFTs would only set you back 5 SOL. That's a whopping 99.9% cost savings.
The larger the collection of NFTs, the more significant the reduction in minting costs with compression. This cost reduction is particularly evident in the image below, which showcases the substantial savings that can be achieved with compressed NFTs.
In the fast-evolving world of cryptocurrency and blockchain technology, Compressed NFTs, or cNFTs, are a breath of fresh air. They make NFT creation more accessible, cost-effective, and versatile, opening up a world of possibilities for creators, businesses, and individuals across various industries.
The collaboration between Solana Labs and the Metaplex Foundation has resulted in a game-changing innovation that has the potential to revolutionize the gaming industry, the world of music and events, the metaverse, and even enterprise-level systems. By storing most of the data off-chain, cNFTs save money and resources, making it easier for everyone to participate in the NFT space.
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