Non-Fungible Tokens are considered an ultimate form of digital media that allows investors to earn while trading these artworks. Major blockchains like Polygon and Ethereum paved the way for NFTs, and these copies of digital art have revolutionized the blockchain ecosystem.
All NFTs have unique features, and they are created and stored differently as well. When tackling NFTs, the term on-chain comes to light. In layman’s terms, it refers to a digital token or asset that exists on a blockchain network.
On-chain transactions refer to the transactions that occur on the blockchain and are dependent on the blockchain’s state for validity. This article takes you through on-chain transactions and how they work in the digital world.
On-chain Non-Fungible Tokens refer to digital artwork pieces completely dependent on the blockchain network. On-chain tokens are written on a blockchain and implemented using smart contracts and metadata in the same blockchain. Put in simpler terms, on-chain tokens are created and stored in the blockchain. All concerning information about an NFT is written on the main net and then later stored on the blockchain network. The information includes the NFT’s generated transaction hash, making them unique assets on the network.
Smart contracts are self-executing programs that ensure certain criteria are met. They can be used to create on-chain NFTs or even point out their storage location. The core of a Non-Fungible Token is its metadata. This holds the NFT’s descriptive information, including where it’s stored, its unique features, and its functions in the blockchain network. Also, all this information lives inside the blockchain.
On-chain transactions simply imply the transactions occurring on a blockchain that is dependent on the same blockchain for validation. Their validity only depends on whether the blockchain has been updated in the public ledger to reflect the transaction. As such, these on-chain transactions are highly secure and provide better security since they can’t be altered once recorded in the blockchain network.
Considering that these validated transactions are recorded and reflected on the distributed public ledger, the on-chain transactions can only be valid once authenticated. Only then can there be an update on the public ledger that reflects the transaction. Smart contracts do this authentication. The network participants, including miners, do validation. When verifying these on-chain transactions, these participants reach a consensus about the transaction’s validity. Afterward, the transaction is recorded and then distributed to the block miners or participants.
Once sufficient confirmations from the network participants, the transactions become completely irreversible. It’s based on the network’s consensus mechanism. Reversal is only possible if the same participants reach a consensus on reversing the transaction.
Understanding On-chain Transactions
On-chain transactions also occur in real-time and are thus secure. This also ensures that the transactions are instantaneous, verifiable, and transparent. However, this isn’t a possibility in reality. On-chain transactions take longer validation periods since a number of participants need to verify and authenticate the transaction before confirmation and recording in the public ledger.
Moreover, even the miners solve complex equations every time a new block is created. As such, miners take longer to validate these on-chain transactions if there is a high transaction volume or congestion in the blockchain network. Other parties must wait for the miners’ validation, which is a downside of on-chain transactions.