Not a day goes by that we don’t talk about NFTs. Some think it’s a bubble, and other people invest exorbitant amounts of money in digital art. Jimmy Fallon of The Tonight Show said in January 2022 that he had a Bored Ape Yacht Club-NFT, as did Paris Hilton and now Justin Bieber. The future of this digital art as NFTs is debatable, but what is certain is that buying NFTs in the network involves sky-high transaction costs.
Paying a few hundred dollars to buy an NFT, regardless of the actual purchase price, is, unfortunately, no exception. That is why there are more and more protocols that want to offer solutions for this. Immutable X is a layer 2 blockchain protocol that enables the trading of NFTs in the Ethereum network, without gas fees. Discover everything about Immutable NFTs in this blog!
Limitations NFTs Ethereum
Ethereum is the largest network on which NFTs run and is also the most commonly used for trading. Meanwhile, there are several NFT marketplaces in other networks, such as NFTb on the Binance Smart Chain, but nevertheless, Ethereum remains invincible. However, Ethereum also has a series of limitations. More and more protocols are being developed that aim to improve this problem in order to maintain the trading of NFTs. Let’s look at the two main limitations first:
Due to the nature of blockchain and network, scalability is the biggest problem Ethereum faces. Especially with the development of DeFi and the rise of NFTs, the network is increasingly overloaded and trading here is accompanied by low transaction speeds and high transaction costs, which we know as gas fees.
Traditional databases can complete between 5 and 15 transactions per second (TPS). This limitation has led to network congestion. Even when Ethereum 2.0 goes live, some say the network will still face scalability issues.
Despite January 2022 being another record trading volume on OpenSea, there are some comments regarding the user experience. Transactions can be unnecessarily slow, which has an impact on both the user experience and price development. Traders want to be able to switch quickly and do not want to wait unnecessarily long.
Solutions exist, but they focus exclusively on improving this user experience. According to the Immutable X team, this is at the expense of the decentralized network and security. So this is a targeted solution to scale NFT trading in a secure environment.
What is Immutable X?
Immutable X is a layer 2 protocol built on Ethereum’s network for trading NFTs and launched in April 2021. Because these unique tokens exist in Ethereum’s network, they are all EC721 tokens. This is the token standard for NFTs on Ethereum.
The platform was created by an Australian game developer Immutable in collaboration with StarkWare, a blockchain scaling startup. Together they want to solve the recurring problem of scalability to enable large-scale trading of NFTs.
Ethereum is the largest blockchain that uses smart contracts. This makes it the ideal platform for developers to build decentralized applications (dApps) and even other blockchains.
Building such an ecosystem from scratch is often time-consuming and unnecessary. Therefore, it is better and above all more efficient to start from an existing protocol and modify it according to your own wishes. Therefore, many tokens in the landscape are also ERC20tokens, and many NFTs are tradable with Ethereum, such as on OpenSea or Rarible. Thanks to Immutable X, you can develop projects in the Ethereum network, where you focus on scalability and gas fees thanks to, among other things, ZK-Rollups.
Blockchain layers Blockchain technology
has different blockchain layers. The first layer is the network layer, such as Ethereum. This ensures communication between all individual participants of the network so that all transactions and information transfers run smoothly. This includes communication between nodes in the network, but also implementing smart contracts and making decentralized applications work.
It is therefore possible to build an extra layer, so you have a total of 4 blockchain layers. In this article, we only briefly discuss the second blockchain layer. This layer includes the consensus algorithm that is used to look at the scalability of the network. By building an extra layer on the foundation, they can solve this problem. This by removing the work from the blockchain by means of, for example, side chains in order to be able to scale.
It is important to know that these NFTs are on the IMX-chain, which is built on top of Ethereum. So they’re just ERC721 tokens in Ethereum’s network, but on a different layer on the mainnet. You can see this as two separate highways where your car can drive on both lanes. On one lane it runs electrically, on the other it runs on petrol. So you can drive on both highways, but the highways are not connected to each other.
So if you want to trade your NFT in the Ethereum network itself, such as on OpenSea, you will have to transfer it to the correct network. From this moment on you will pay gas fees. Always check beforehand whether the NFTs that are available on IMX can also be offered on OpenSea.
Do you want to know more about blockchain layers? Discover in this blog which layers exist and how they work.
How does Immutable X work?
Immutable X is thus the first layer 2 for NFTs in Ethereum’s network. By using ZK-Rollups, NFT trading on Immutable X takes place without long transaction times, but also without gas fees. This alone is an entirely new development.
ZK-Rollup, Zero-Knowledge Rollups, are smart contracts layer 1 that scale the Ethereum network by processing transactions off-chain. Transaction data is processed in the main network.
Because this transaction data is located on the mainchain, these rollups are protected by layer 1. Specifically? The security of Ethereum is inherited from the transaction data, while its effective execution takes place outside this blockchain. The question is often asked why side chains are not used. The problem with side chains is that they are not very decentralized. Many have only a few central nodes with their own consensus algorithm. It, therefore, allows sufficient information and transactions to pass through but poses a danger to the decentralized character.
Immutable X has an integrated wallet that you can connect to any Ethereum wallet. The advantage is that the protocol provides an intermediate layer. In this way, Immutable X can also support external ecosystems, without safety being a problem here. This forms on layer 1.
Immutable X supports the following wallets:
After you have connected your wallet, you have to sign an additional smart contract to make this connection. Always pay close attention to what you draw. Read the message carefully and know what you are giving approval for. In a decentralized environment, you always bear the responsibility yourself.
Advantages of Immutable X
To view the possibilities of Immutable X, it is useful to look at all the advantages:
- No gas costs
- Set trading fees yourself
- Scalability up to 9,000 transactions per second
- Secured by Ethereum
In fact, it takes over all the beneficial properties and improves the critical points. Security is always essential in a decentralized network. The fact that Immutable X is secured by Ethereum itself is a very big advantage. In addition, they can go from 30 transactions per second to as many as 9,000 transactions. This allows for unprecedented scalability in the trading of NFTs. And to make it even better, say goodbye to gas fees.
$IMX is an ERC-20 utility token that rewards Immutable X users. Do you trade NFTs on the platform, provide liquidity or build applications on Immutable X? Then you will receive IMX tokens for this. No team member receives IMX tokens for their work themselves, the token is for the community only.
The token is used as a protocol fee. Immutable X takes a 2% fee on all primary sales. This is similar to OpenSea, which has the same structure but uses 2.5% here. 20% of this fee is paid in the native token. This can either be done directly in IMX tokens, or the platform will automatically swap some of the purchasing currency, Ethereum in this case, to IMX. This means that users themselves do not need to own IMX tokens in order to transact.
Immutable therefore gives you the freedom to determine your trading fees yourself, but 20% of this is paid in the native token. This does not change the zero gas fees.
Users who own the IMX token and stake it in the protocol will be rewarded for this. This amount is proportional to your share of the total amount. But there’s more. Users can earn IMX rewards by trading NFTs on the platform. For this, they receive points that are distributed among the users for 24 hours.
Immutable X NFT Marketplace Immutable X
Immutable X’s Marketplace aims to be the future of NFT trading with all its benefits, without users having to pay hundreds of dollars in gas fees. In the dashboard, you immediately get an overview of all collections. Fortunately, you can also search for specific keywords.
experience What is immediately noticeable is that there is no breakdown menu here as with Rarible or OpenSea. Immutable X currently focuses exclusively on digital art and not on other types of NFTs such as music or photography.
In addition, it is useful to get an overview of an entire NFT collection. This way you know how many NFTs there are, which can also determine your purchase. Besides popularity, scarcity is of course an interesting factor that can determine the price. With Immutable X you only see specifications about the current NFT, but there is no overview page of the entire NFT collection.
In the overview below you see the Nifty Nuggets collection where you can filter links on external characteristics. However, you won’t get any specifications here about how many Nifty Nuggets exist or who the team behind it is.
None other than OpenSea announced in March 2021 that it would integrate Immutable X into its NTF marketplace. In addition, there is also speculation that Coinbase will want to integrate Immutable X’s scalable NFTs with the launch of their own highly anticipated NTF marketplace.
Trading in NFTs exploded in 2021 and a new record was set in January of 2022. In January 2021 alone, nearly $5 billion worth of NFTs were traded on OpenSea alone. In addition to these astronomical amounts, there are still many trading platforms that are also developing further and where more and more trade is taking place.
The interesting thing here is that we are just at the beginning of all NFT applications and the applications in the world of DeFi. We are already seeing several artists launching their own NFT collections, including Adidas and Dolce&Gabna. But for now, many people are staying away from NFTs, for one simple reason: gas fees. This excludes a large part because they simply do not want to take the risk, or are not financially strong to pay hundreds of dollars in gas fees.
Immutable X offers solutions to the problem here. But is this the holy grail? The success of an NFT marketplace depends on several factors. The popularity and number of users are an important part of this. Of course, you want to trade on a platform that has many users, in order to continue trading your NFT with nice profits. In addition, ease of use is also important. We see that there is still a lot to be achieved with Immutable X. Despite the fact that the offer is also less, as a user you cannot filter. OpenSea is and remains a pioneer as an NFT marketplace, despite the high gas fees.