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Bitcoin NFTs Explained: What They Are, How They Work, and Why You Should Build Them

Every two months, almost 40,000 new customers join the NFT ecosystem, and the average price of an NFT is rising. Our modern era is experiencing a rebirth with the influx of NFT-based creations hitting the market. The current buzz around these new assets is focused on pushing the limitations of using NFT technology to sell digital art and unlock play-to-earn games.

Type
Deep dive
Topic(s)
NFTs
Published
February 4, 2022
Author(s)
Content Marketing Manager
Bitcoin NFTs Explained: What They Are, How They Work, and Why You Should Build Them
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Bitcoin is the most secure, reliable, and fully decentralized blockchain that exists today, and the market reinforces that point. Bitcoin’s market cap is double that of the incumbent NFT platform, Ethereum. In fact, Bitcoin’s market capitalization is over $700B at the time of this publication (and has crossed $1T in the past). The overall market capitalization of all cryptocurrencies is around $1.6 trillion, and Ethereum is the second-most valued digital currency, with a market capitalization of over $300 billion.

The notion of a Bitcoin-backed NFT is not a novel one. Developers are bringing NFTs to many different blockchains. However, Bitcoin NFTs are a concept that many developers are just now discovering is possible thanks to the Stacks blockchain, which is a programmable layer for Bitcoin.

What Is a Bitcoin NFT? 

A Bitcoin NFT is a non-fungible token secured by Bitcoin and built using the Stacks blockchain. We’ll get into the mechanics of how a Bitcoin NFT works below, but first let’s explore what an NFT is. A non-fungible token is unique, whereas a fungible token is interchangeable (for example, trade a $10 bill for a different $10 bill, and there is no material difference between them).

That non-fungible trait is critical to a problem we face today: digital content is considerably easier to duplicate than something that is physical. To the human eye, there’s little-to-no difference between a copy and the original when dealing with digital mediums. That makes it really hard for digital assets to become valuable if they can be duplicated an infinite number of times.

NFTs solve that problem. NFTs create and retain value for digital content through their uniqueness by creating and enforcing actual digital scarcity. In other words, NFTs effectively enable digital property rights because the technology allows users to prove that they own a specific digital asset. That enables digital goods to capitalize on the laws of supply and demand and have standalone value for the first time in history.

So what sets Bitcoin NFTs apart from other NFTs? Simply put, Bitcoin NFTs are created for the Bitcoin network instead of another blockchain, such as Ethereum. And which blockchain an NFT is on has important ramifications for the security of that asset.

Bitcoin is the most decentralized and secure blockchain. It offers exceptional durability and stability for assets created and held on the network. The financial and computing resources needed to attack the Bitcoin network are so high that it is nearly impossible to hack. No other blockchain comes close to offering that level of security. There’s something to be said about one’s property being safely protected on the most hack-resistant network, and the one most likely to still be here 50 years from now.

But despite those advantages, building Bitcoin NFTs was not an easy feat. For example, take Rare Pepes, an early Bitcoin NFT. Rare Pepes are a series of NFTs built around the ubiquitous pepe meme. While innovative, they struggled to really take root and become successful with Bitcoin. Instead, they show up as a “wrapped” asset on other L1s

What Is a Bitcoin NFT on the Stacks Blockchain?

The Stacks blockchain is the first to offer a novel and scalable approach to Bitcoin NFTs. Stacks is the largest and fastest growing Web3 project in the Bitcoin ecosystem. It allows developers to create decentralized apps (dApps) that leverage Bitcoin’s security, decentralization, and capital, all without any changes to Bitcoin itself. You can think of Stacks as a separate but connected programming layer for Bitcoin.

Through that programmability, developers can create Bitcoin NFTs with royalties and interactive on-chain markets, all through expressive smart contracts that do not clog up the main Bitcoin chain. Instead, those smart contracts exist on the Stacks blockchain, and settle on the Bitcoin blockchain.

In other words, the Stacks blockchain acts as a decentralized ledger that tracks each NFT’s ownership and transaction history, but that data then settles on Bitcoin with every mined Bitcoin block, which means it inherits the security of the Bitcoin network. If you wanted to alter the history of Stacks, you’d have to alter the history of Bitcoin too.

Bitcoin NFTs are created and defined in Clarity, the Stacks blockchain’s programming language. Compared to other smart contract programming languages, such as Ethereum’s Solidity, Clarity is optimized for security and predictability. Clarity also makes the source for every smart contract publicly readable on the blockchain, so developers can borrow contracts from other NFT projects to build their own.

In terms of basic building blocks for developers, SIP-009 defines the standard for NFTs on the Stacks blockchain. Each NFT is always associated with a single smart contract. Within the smart contract, NFTs are listed numerically, starting at 1. The must-have traits and functions are defined in the standard as well, including a unique identifier and other metadata. However,  NFTs are not limited to possessing only the traits and functions mentioned in the SIP. We welcome innovators.

Why Build NFTs for Bitcoin? 

Prior to the creation of the Stacks blockchain, Ethereum provided smart contract functionality to developers when Bitcoin could not. Despite that, Bitcoin has remained the largest cryptocurrency. Bitcoin has appeal as a store of value and has proven itself as the decentralized money layer for the internet.  

It’s the oldest blockchain, and Bitcoin has never been hacked. It’s advantageous to create NFTs backed by Bitcoin for these two reasons. You gain access to all of the money and users currently in Bitcoin’s ecosystem, and you can leverage Bitcoin’s security. Couple these advantages with new scalability and programmability thanks to Stacks, and Bitcoin NFTs are poised to take over the NFT market.

Moving Forward With Bitcoin NFTs on Stacks 

When creating NFTs, smart contracts, or apps for Bitcoin, it’s reassuring to know that their value will be preserved because Bitcoin isn’t going anywhere. Stacks brings your projects scalability, which means it can scale up or down in performance or cost in response to your needs.

Hiro is a key contributor to the Stacks ecosystem. At Hiro, we work hard to give developers the tools they need to create, deploy, and use apps and smart contracts within the Bitcoin ecosystem. We specifically designed developer tools to enhance Bitcoin’s programmability through the Stacks blockchain.

Join us and become a part of this growing and thriving creative community. Use this tutorial to create your own Bitcoin NFTs on Stacks. 

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