Flow Blockchain: How It Supports Your Favorite NFTs

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NFTs, or non-fungible tokens, are unique, non-interchangeable repositories of cryptographic data stored on a blockchain to validate a digital asset. Used to represent items like videos, photos, artwork and other digital files, NFTs have exploded in popularity. Sales volumes reached $2.5 billion in the first half of 2021. One NFT project, CryptoKitties, was so popular that it overwhelmed the Ethereum network. As a result, the developer behind CryptoKitties, Dapper Labs, created a new blockchain named Flow to tackle weaknesses observed in the Ethereum blockchain. In addition to trying to solve these scalability issues, Flow blockchain also has increased transaction speeds and ease of usage, and lowered transaction costs.

Interested in what the Flow blockchain encompasses? Scroll on as we look at the Flow blockchain, how it works, and how it supports NFTs as compared to the Ethereum network.

What Is Flow Blockchain?

Flow is a fast, decentralized and developer-friendly blockchain, purposely built to support decentralized apps (DApps), games and the digital assets they run on. It’s designed for scalability and faster speed without sharding techniques, which makes it ideal for crypto-based games and NFT collectibles.

Flow promises considerable improvement in speed and throughput, which it achieves by employing a multi-node, multi-role architecture. This is a departure from the traditional blockchain architecture, in which nodes store the entire transaction history and verify all transactions. In contrast, Flow splits its network to allow the total work to be shared across the nodes, with each node validating a portion of a transaction.

What Issues Do Flow Address?

Solutions to Limited Scalability

The main issue with the Ethereum blockchain is its limited scalability. Ethereum can only handle 13–15 transactions per second, making it inadequate for large-scale usage.

This inefficiency was what led the developers of CryptoKitties to create the Flow blockchain. When the game’s popularity peaked, Ethereum could no longer handle the increased numbers of transactions. Therefore, Flow was developed mainly to solve the problem of scalability. Its prototype achieved a throughput of 1,000 transactions per second (TPS), and their next target is 10,000 TPS capability.

Ethereum still runs on the proof of work (PoW) consensus protocol, in which miners jostle to create new blocks on the blockchain by being the first to solve complex mathematical problems. The winning miner shares the new block with the Ethereum network, and is rewarded for their efforts with payment in ETH. However, PoW is at the root of the Ethereum’s network’s poor scalability. With the anticipated rollout of Ethereum 2.0 (also known as ETH 2.0, or “Serenity”), the network plans the move to proof of stake (PoS) consensus. 

With PoS, validators stake ETH in order to be part of the transaction verification. The validators are selected randomly to add a new block to the network and be rewarded. Because these validations don’t require as much raw computing power as PoW consensus, PoS considerably reduces energy consumption.

Reducing Costs

Flow developers also seek to reduce the cost of transacting on the Ethereum network. Ethereum users pay gas fees for network transactions. The size of these fees depends on the complexity of the smart contract executed and the network availability. On some days, the average gas fee per transaction could be as high as $20. Flow charges two fees per transaction, the first starting at 0.001 FLOW (~$0.03) to create an account, and the transaction fee, starting at 0.000001 FLOW. 

Ethereum was designed to create applications that run on smart contracts. With Ethereum, a smart contract cannot be changed after its execution. However, Flow’s smart contracts can be released in a beta state. Users can either choose to work with the code in its unfinished state, while the contract authors continuously update it, or wait for the smart contract to be completed. The smart contract becomes immutable once the authors are convinced it’s completely safe and doesn’t require further work. This has the advantage of improving the security of smart contracts for end users.

Flow: A Brief History

As mentioned, CryptoKitties was an early NFT game developed by Dapper Labs, a Canadian company working with the Ethereum blockchain. Game players own, breed and trade virtual kitties, which are represented by non-fungible ERC721 tokens. The game’s popularity soared after its release in November 2017, quickly reaching 10,000 users — and clogging up the Ethereum network, driving gas fees sky-high in the process.

Determined to find a way around the technical challenges they faced, Dapper Labs went to work and created a new blockchain precisely optimized for digital collectibles, games and other NFTs. Dapper Labs raised $18 million on CoinList in October 2020 through a public sale of Flow blockchain’s native token, FLOW.

With the reputation accompanying the success of CryptoKitties, Dapper Labs attracted deals with major brands: NBA, Warner Music Group, UFC and Ubisoft. In late 2020, NBA Top Shot, a marketplace for basketball-themed NFTs, spiked in popularity. And in early 2021, riding the popularity of NBA Top Shot, Dapper Labs raised an additional $305 million, raising the company’s total valuation to $2.6 billion.

How Does Flow Work?

Flow blockchain’s PoS mechanism requires validators to stake FLOW tokens in order to be a part of the network. However, Flow block validation works differently from that of other blockchains. 

Flow divides its network into subdivisions to allow the total work to be shared across nodes, with each node only validating a portion of the transactions. Nodes are specialized for certain transactions. This is in contrast to the typical scaling solution known as sharding, which can result in its own scalability issues, leading to downtime.

By splitting up the validation of tasks across nodes, Flow’s blockchain aims to increase the speed and efficiency of transactions.

Flow’s Architecture

Flow achieves its parallelization by using a multi-node, multi-role architecture. This means that Flow divides the validation stages of a transaction among four distinct node types: collection, consensus, execution and verification.

  • Collection nodes increase efficiency by enhancing network connectivity and data availability for DApps.
  • Consensus nodes determine the flow and order of transactions.
  • Execution nodes handle computation involved in each transaction, and enable speed.
  • Verification nodes double-check to ensure the accuracy of the computation done by the execution nodes.

Flow’s Programming Language

Dapper introduced a native programming language, Cadence, for writing smart contracts on the Flow blockchain. Cadence is a resource-oriented programming language created specifically for managing ownership of digital assets like collectibles, art and cryptocurrencies on the Flow blockchain. It features a unique data model for digital assets called resources, making it easier to create, transfer and securely store digital assets. 

Digital assets in Cadence are impossible to duplicate or lose, and Cadence provides human-readable, capability-based access control. These new features ensure that Cadence can be learned and audited, making it ideal for beginning developers.

A standout feature of the Cadence programming language is that developers can release DApps in beta while updating the code. Users will be notified of the ongoing changes as they use the software. Once the developers conclude and submit the final version of the code, it then becomes immutable.

Flow’s User Experience

Dapper Labs developed Flow with mainstream adoption in mind. Therefore, they focused on making the interface user-friendly and simplifying the steps to start creating projects. Crypto newbies can quickly learn how to interact with the blockchain and develop DApps.

Flow’s NFT Ecosystem 

Although relatively new, the Flow blockchain is already powering enormously popular NFT projects, with more in the works.

CryptoKitties

Within three hours of its initial release in November 2017, CryptoKitties became the third-most-active smart contract on the Ethereum network. As mentioned above, its surging popularity revealed scalability issues with Ethereum. 

With the launch of the Flow blockchain, Dapper Labs was able to migrate digital collectibles from the Ethereum network to Flow. While users can still access their CryptoKitties on the Ethereum blockchain, they can also transfer them to the Flow blockchain in order to enjoy lower transaction costs and new features.

NBA Top Shot

NBA Top Shot is a digital sports collectible card whose users collect highlights (“Moments”) of their favorite NBA players. These collectibles are acquired, traded and stored on the Flow blockchain. Since it was originally launched on the Flow blockchain, NBA Top Shot’s transactions are faster and cost less than for CryptoKitties.

NBA Top Shot quickly became popular and currently boasts over 600 users, including Mark Cuban, Tyrese Haliburton and other celebrities.

VIV3 NFT Marketplace

The VIV3 NFT is a marketplace powered by Flow to empower digital artists and creators. It was launched in January 2021, and started with works from renowned artists Anne Spalter and Ben Mauro.

In addition to the three popular NFT projects above, Dapper Labs is also working on exciting partnerships with UFC, Samsung, Ubisoft, Dr. Seuss and Warner Music Group.

Why Is Flow Preferred for NFT Projects?

Dapper Labs developed Flow from the ground up in order to support a new generation of popular games, DApps and digital assets without compromising decentralization. Not surprisingly, it has quickly become popular with developers. Here are the main advantages that the Flow blockchain has over other blockchains.

  • Flow’s multi-role, multi-node architecture creates a division of labor that ensures efficiency and eliminates redundant processing efforts.
  • Developer ergonomics: Flow’s network features upgradeable smart contracts, built-in logging support for tracking of smart contract behaviour, Flow Emulator, and overall features that enhance developers’ productivity.
  • Cadence: Flow’s resource-oriented, user-friendly and safe programming language has been specially designed for crypto assets and DApps. Beginning developers can quickly get started on NFT projects using Cadence, compared to Solidity or other programming languages.

The success of NBA Top Shot and CryptoKitties validates the concept that Flow was optimized for the kind of collectible and interactive crypto experience that’s fast gaining popularity. 

FLOW Tokenomics

The Flow blockchain’s native token is FLOW, which was designed as a means of exchange and also to serve as a long-term reserve asset for the Flow network economy. The Flow token enables developers, validators and ordinary users to participate in the Flow blockchain and get rewards.

As of October 2, 2021, the price of FLOW is hovering around $20. The circulating supply is 64,444,582 FLOW, and the live market capitalization is almost $1.3 billion.

The Future of Flow

The NFT craze shows no signs of abating, and Flow is right at the heart of it. The success of NBA Top Shot has given credibility to Dapper Labs’ blockchain, and other developers are lining up to tap in.

However, developers aren’t the only ones showing interest. NFT marketplace Rarible, which previously had exclusively focused on Ethereum-based NFTs, has announced that it will expand its operation to Flow, and has raised $14.2 million for that purpose.

Flow is expanding as well. In June 2021, Dapper Labs launched FUSD, the first U.S. dollar-backed stablecoin on Flow. Aside from venturing into stablecoins, Flow is also projecting its future as a platform for more elaborate crypto gaming experiences.

As the Flow blockchain continues to expand, holders of FLOW will be able to use the coin in various ways. These include transaction fees for validation services, a means of exchange, collateral for secondary tokens, participation in governance and deposit for data storage.

The Bottom Line

The user-friendly Flow blockchain is made for extensive scaling. It provides fast and low-cost transactions, ideal for DApps like NFT marketplaces and crypto games. FLOW is the native token that powers the network.

Flow is a high-quality platform for consumer applications such as games, collectibles and the apps they interface with. Purpose-built for NFTs, Flow has distinct advantages over other blockchains. Flow’s unique architecture enhances scalability and efficiency, allowing it to deliver the performance needed to support applications without sharding, or compromising its decentralization.

Disclaimer

This article is intended for and only to be used for reference purposes only. No such information provided through Bybit constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific person. These forecasts are based on industry trends, circumstances involving clients, and other factors, and they involve risks, variables, and uncertainties. There is no guarantee presented or implied as to the accuracy of specific forecasts, projections, or predictive statements contained herein. Users of this article agree that Bybit does not take responsibility for any of your investment decisions. Please seek professional advice before trading.

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