Understanding Solana Compressed NFTs (cNFT)

In the Solana ecosystem, Compressed NFTs (cNFT) are innovative technology that drastically reduces NFT issuance costs. With the ability to issue millions of NFTs for a few dollars, new possibilities have opened. This guide explores cNFT principles and characteristics in detail.

What are Compressed NFTs?

Compressed NFTs are NFTs that significantly reduce on-chain storage costs using State Compression technology.

Traditional NFTs store all data directly on the blockchain. Each NFT occupies a separate account, incurring storage costs (rent). Costs increase rapidly with mass issuance.

Compressed NFTs utilize Merkle Tree structures. Instead of storing all individual NFT data on the blockchain, only data hash values are stored. Full data is stored in off-chain indexers, with only minimum information needed for verification recorded on-chain.

This method can reduce issuance costs by over 99%.

Technical Operating Principle

The core of cNFT is the Concurrent Merkle Tree.

Merkle Trees are tree structures that efficiently verify data. All NFT data is stored as hashes in leaf nodes, and these hashes are combined into parent nodes, ultimately forming a root hash.

Only the root hash is stored on the blockchain. To prove the existence and ownership of a specific NFT, you present the path (proof) from that NFT to the root.

Concurrent Merkle Trees are optimized to allow multiple transactions to modify the tree simultaneously. Combined with Solana’s high throughput, even large-scale minting can be processed quickly.

Comparing cNFT and Regular NFTs

The two types of NFTs differ in several aspects.

In cost, regular NFTs cost about 0.01 SOL or more per piece. cNFTs cost less than 0.00001 SOL per piece, over 1000 times cheaper. Issuing 1 million NFTs requires thousands of SOL for regular NFTs, but just a few SOL for cNFTs.

In storage method, regular NFTs store all data on-chain. cNFTs store only hashes on-chain with full data stored in indexers.

In trading method, regular NFTs can be traded on all marketplaces. cNFTs can only be traded on marketplaces that support cNFT. Currently, major marketplaces like Magic Eden and Tensor support cNFT.

In transfer method, regular NFTs are the same as regular token transfers. cNFTs are slightly more complex as proofs must be submitted together. However, wallets and marketplaces handle this automatically.

cNFT Use Cases

Low costs enable new use cases.

Used for large-scale community badges or certificates. Event participation proofs, course completion certificates, membership badges can be issued in millions.

Suitable for game items. In-game consumables, common items can be made into NFTs without cost burden.

Used for social media integration. Likes, comments, activity records can be recorded as NFTs.

Used for ticketing systems. Concert, sports event, and event tickets can be cheaply issued as NFTs.

Used for loyalty points or rewards. Customer reward programs can be built on NFT foundations.

cNFT Limitations

cNFT also has several limitations.

There’s indexer dependency. Since full data is stored in indexers, indexer problems can affect data access. However, multiple indexers replicate data, so complete loss risk is low.

Some functionality limitations may exist. Not all smart contracts and protocols perfectly support cNFT.

There’s slight trading complexity. Proof generation and verification are needed, making transaction processing slightly more complex. From user perspective, wallets handle it automatically so difference is barely noticeable.

Gas fees can vary. Transaction costs can differ based on proof size.

Holding cNFT

Methods for holding and trading cNFT are similar to regular NFTs.

Phantom wallet fully supports cNFT. They can be viewed alongside regular NFTs in the collectibles tab.

cNFTs can be traded on Magic Eden and Tensor. The trading process is identical to regular NFTs.

Transfer to other wallets is also possible. Transfer from wallet using the same method as regular NFT transfers.

Issuing cNFT

If you want to issue cNFT directly, there are several options.

Use Metaplex’s Bubblegum protocol. Developers can implement directly through the SDK.

No-code tools also exist. There are services for creating cNFT collections without coding.

You can also use marketplace launchpads. Some marketplaces support cNFT issuance.

Future of cNFT

cNFT has become an important part of the Solana NFT ecosystem.

Large-scale adoption became possible. With lower cost barriers, more businesses and projects can utilize NFTs.

New business models are emerging. Models previously impossible like micro NFTs, mass distribution, one-time NFTs became possible.

Other blockchains are also introducing similar technology. Solana’s cNFT may become an industry standard.

Conclusion

Compressed NFTs are a good example of Solana ecosystem’s technological innovation. They drastically reduced issuance costs while opening new utilization possibilities.

From a holder perspective, they can be used almost identically to regular NFTs, so you don’t need to be very conscious of technical differences. However, understanding cNFT principles helps deeper understanding of the Solana ecosystem.

In the next guide, we’ll learn how to read Solana NFT metadata and on-chain data.