Loopring Hints At Counterfactual NFTs — How Could They Work?

Outside of cheap Solana, Ethereum-based minting has become unaffordable for some. Loopring continues to bring innovation into its L2 scaling, now including affordable NFT minting.

NFT Smart Contract Background

The NFT evolution is heating up, just as one would predict based on smart contract flexibility. When smart contract – software – is deployed on a blockchain, it gains the blockchain’s immutability, making the transactions unalterable. More importantly, a smart contract is effectively a wallet, effectively running itself.

Because smart contracts are delegated to sending and receiving transactions, they can read, deliver and store data. However, for NFTs to be possible, a new type of contract had to be developed – ERC-721.6 – to interact with multimedia objects.

This non-fungible token standard has come a long way. At first, it was reserved for simple digital collectibles. More recently, they could even be used for staking. Case in point, Anonymice NFTs can be staked with a Cheeth smart contract. Non only do staked NFTs then generate CHEETH tokens, but they can be used to create new types of NFTs.

More importantly, the Anonymice experiment showed that mice NFTs can be minted for free (except gas) and 100% on-chain, without placing them on an InterPlanetary File System (IPFS) and without API. While IPFS is not a blockchain, it does provide a cheaper way to distribute a file and then store its hash into a smart contract, making NFT issuance cheaper.

However, is there a way to minimize NFTs’ minting cost further, including the gas? After all, transaction costs on Ethereum are still exceedingly high.

Fortunately, near-zero fee NFTs may be forthcoming.

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Loopring’s Counterfactual NFTs

Loopring’s counterfactual wallet was detailed on August 29th. Daniel Wang explained it as a smart contract wallet, or smart wallet, that has a decoupled private key from the address. Meaning, if the private key is compromised, it can be swapped with a new one to secure the wallet. Likewise, counterfactual wallet has a decoupled logic, allowing for upgrades behind a proxy.

However, the key feature of its wallet lies in the name. Counterfactual means that the wallet is not deployed, in order to avoid paying for gas. Therefore, people can try the wallet before paying by delaying it. Once they decide to opt for it, they get the following features.

As covered previously regarding the rumor that GameStop will employ Loopring expertise for its NFT marketplace, Loopring (LRC) is all about building an L2 scaffolding to circumvent Ethereum’s L1 network congestion. Based on Discord correspondence involving Loopring developer, Brecht Devos, a new kind of NFT seems to be on the way, following the counterfactual wallet design philosophy.

When looking at counterfactual NFT readme file, this type of free NFT contract would allow users to mint NFTs via the aforementioned IPFS method – storing the file on the P2P network and then retrieving the hash into the L2 smart contract.

Loopring’s user interface (dApp) would then use that data to produce a counterfactual NFT address as the default minting one for the account. Because L2 scaling solutions have significantly lower gas fees, such as Arbitrum, the high cost of Ethereum-based NFT minting is then equally mitigated.

Loopring devs have already released a tutorial on how to use their protocol to reduce crippling ETH gas fees. Given the presently high barrier to NFT marketplace entry, such a development would open the NFT space to an even broader budget range.

OpenSea Has Its ‘Try It’ NFT Minting Version

At the end of 2020, OpenSea, the domineering NFT marketplace with over $13 billion trading volume, launched lazy minting. Through its collection manager, creators can mint an NFT, based on ERC-1155 standard, without an upfront gas fee.

Then, the gas cost is paid after the first on-chain transfer is executed, which then triggers on-chain issuance from the metadata. This is quite similar to Loopring’s approach. In fact, it is possible to freeze NFT metadata on OpenSea, by using the IPFS network.

Doing this would decentralize your non-fungible asset with Filecoin’s verifiable and persistent storage on a decentralized network. It seems that the two complementary protocols – Filecoin and IPFS – have a secured future in building Web3.

This week’s stablecoin hearing pinned Ethereum as exclusionary based on its exorbitant gas fees. Do you think Ethereum’s window to fix its cost problems is closing or is its ‘network effect’ too powerful? Let us know in the comments below.