NFTs, forking, Algorand and Ethereum’s reindeer in the room
For a blockchain to continue to evolve and keep up with new technology, upgrades to the protocol need to be implemented, to carry out these upgrades nearly all blockchains will need to fork. Forking is a term used to describe when a blockchain is split into two. This process creates two blockchains that are identical to each other. One fork of the blockchain will be the upgraded version and the other fork will be the original version.
A soft fork describes a situation when the community in charge of the maintenance of the blockchain all agree that either the newly created, upgraded blockchain is the valid chain or the original chain is the valid chain and then disregarding one of the two chains as invalid. Although soft forks may seem like an acceptable way for blockchains to evolve, duplications of every block are still made, which is not ideal.
Most blockchains are, like Algorand, decentralised. Decentralisation has many benefits but when a blockchain needs to fork, decentralisation makes it very hard for a community to agree on things. For a soft fork to take place everybody involved in the community have to agree on which is the valid chain. When the community can’t agree on which is the valid chain after a fork creates what is called a hard fork. Both chains remain valid, both chains continue to exist and both chains, apart from the upgrade, are identical. An example of this is when Ethereum hard forked, creating Ethereum Classic.
Hard forks have many implications on the validity of recorded on chain data, especially recorded data that should not be duplicated. NFT art is affected by forking, if an artist mints a 1/1 on a blockchain that forks there is no guarantee that it will stay a 1/1. In fact it is highly likely that it won’t stay a 1/1 — and as time goes by that 1/1 may eventually become thousands of 1/1s all existing at the same time due to the doubling effect.
Algorand doesn’t fork and why we see it as the natural home for NFTs. Although the forking issue is not widely talked about in regards to NFT art it inevitably will be talked about in the future. A 1/1 minted on Algorand will always be a 1/1 ensuring rarity.
NFT art sales are now in the billions of dollars and most of that money has been spent on NFTs minted on Ethereum. When hard forking becomes a more widely discussed topic, holders of NFTs that exist on blockchains like Ethereum will start to be concerned regarding their validity but there is a solution to this issue coming very soon in the way of NFT bridges. In the coming months anyone wishing to secure the rarity of their Ethereum based NFTs will be able to bridge them to Algorand using a system called state proofs. We think over the next couple of years we are going to see NFT collectors securing their art by bridging them over to Algorand.