A Deep Dive Into Immutable X: The First Layer 2 For NFTs

Deep Dive Sep 02, 2021

On August 25, we announced the Immutable X Token Sale on CoinList, starting September 8 at 17:00 UTC. Immutable X is the first Layer-2 (L2) scaling solution for NFTs on Ethereum, with instant trade confirmation, high transaction throughput and zero gas fees - without compromising the security of Ethereum.

This week, we sat down with the Immutable X team to break down what they are building, its use cases, and their recent traction in ensuring that more people can access world-class NFTs.

Let’s dive in.

1. To begin, what is Immutable X, who is it built for and what problem does it solve?

Immutable X is a protocol that makes it easy for developers to create successful NFT projects. Despite the recent explosion in NFT trading volume and interest, there are still many barriers for developers and users preventing mainstream adoption of NFTs, particularly on Ethereum (where the vast majority of NFTs are traded).

Immutable X allows any developer to create world class NFT projects, without having to compromise on the liquidity and network effects of Ethereum. With this in mind we set out to solve the following problems:

  • Poor user experience:  Immutable X gives users the best trading experience, with zero gas fees, instant trades and high liquidity via a shared global order book.
  • Low scalability without compromising security: The Immutable X protocol supports an extremely high transaction throughput (9,000+ TPS), without requiring users to compromise the custody of their assets.
  • Slow developer experience: Immutable X’s developer suite (SDKs and APIs) provides a permissionless gateway for developers to build a mainstream-ready NFT game, dapp or marketplace in days, not months.

2. What are the advantages you found building a layer 2 protocol on Ethereum?

A critical decision for us when building Immutable X was the choice of the underlying scaling solution and blockchain infrastructure. We weren’t interested in switching to another blockchain, or to a sidechain because NFTs are only as valuable as the blockchain they are built on.

Ethereum is by far the most dominant smart contract blockchain, and as a true layer-two zk-rollup, Immutable X directly inherits the security of Ethereum. Users can move their assets trustlessly between layer 1 and layer 2, which means there is no custody or security risk like with the Poly Network hack. NFTs on Immutable X never leave Ethereum at all.

Another massive advantage of Ethereum is its established and rapidly growing network effects. Ethereum has a thriving developer ecosystem creating useful applications and integrations across the ecosystem, a passionate community of end users and a massive market cap securing the network. This makes adoption of Immutable X easier because we can plug into existing Ethereum tooling such as stablecoins, DeFi protocols and wallets.

Finally the Ethereum community has been extremely supportive of our project, which we have been incredibly grateful for.

3. Why create a native token, IMX? What are its use cases?

IMX is an ERC-20 utility token built for the purposes of accelerating the growth of Immutable X by rewarding pro-network activities on Immutable X, such as trading, liquidity provision and building applications. The token aligns incentives between traders, creators and marketplaces so that everyone benefits from protocol activity.

The three main use cases of the IMX token:

  • Transaction Fees: 20% of the protocol fee on every Immutable X transaction must be paid in IMX. If users do not currently own IMX, Immutable will convert the fee by purchasing IMX on the open market (preserving a seamless user experience).
  • Governance: As an active member of the Immutable X community, users have an IMX-weighted vote on the future of the protocol.
  • Staking: All IMX used to pay transaction fees is sent to a staking rewards pool. This pool will be proportionally distributed among users who are currently staking IMX — the more users stake, the more they will earn. Below is an example of how staking works:
For illustrative purposes only

4. The NFT ecosystem has exploded in popularity in 2021 and is seeing increased adoption and media attention. What do people misunderstand about NFTs?

The two main misconceptions that often given NFTs a bad rap from people new to the space:  

NFTs are “just jpegs”. NFTs are not limited to only ‘jpegs’ (images). They are unique digital tokens which can represent ownership of any item, including videos, in-game items, music, fashion, memberships, big ticket items like real estate and more. Thanks to the trustless and transparent nature of the blockchain, the public can easily verify the true ownership of these assets, making these NFTs far more valuable than the images associated with them.

NFTs are terrible for the environment. NFT energy use will decrease drastically as the underlying blockchain technology improves. In fact, Immutable X is at the forefront of this initiative, and uses a fixed amount of energy regardless of scale (less than 1% of the standard Ethereum energy cost). We even purchase carbon offsets for the tiny amount of remaining emissions, and are carbon positive as a business.

5. Immutable X has several strategic partners integrating with its infrastructure. Can you share any notable examples?

Currently, we have dozens of world-class partners building on Immutable X, with hundreds on our waiting list. While the majority of the partners are from gaming, collectibles, marketplaces and DeFi, we built Immutable X to be the winning solution for large mainstream experiences  in the near future. Here are some of our notable partners who are integrating with our protocol:

  • OpenSea: The world’s largest peer-to-peer marketplace for crypto collectibles and NFTs, currently responsible for billions of dollars in NFT volume. By integrating with Immutable X, OpenSea will give their users instant, gas-free trading on Ethereum without compromising asset security.
  • Illuvium: A decentralized NFT collection and auto battler game built on Ethereum. By using Immutable X’s hyper-scalable protocol, Illuvium users will enjoy a variety of benefits including increased NFT liquidity for all traders.
  • ECOMI: Their app, VeVe, has over 350,000 active users and they offer the most comprehensive digital collectible experience for licenced NFTs from partners such as Marvel. Immutable X is ECOMI’s chosen blockchain partner for VeVe digital collectible NFTs.

At Immutable, we believe that everything which is unique and tradable, including artworks, in-game assets and title to physical goods, will eventually be represented as public blockchain NFTs. Seeing the massive surge in NFT volume this year has only validated that thesis. We’ve loved seeing NFT avatars spread across twitter, and NFT art hit the mainstream - NFTs are here to stay!

In terms of specific verticals, Immutable is in love with gaming. Gaming is currently a USD 300 billion industry and is expected to grow roughly 10% a year between 2021 and 2025, making it larger than the sports, movie and music industries combined. This content is a fantastic opportunity for tokenization: every one of these assets would be more valuable to users if it were represented by an NFT. Games like Axie Infinity have already gained more than 350,000 daily active users and have tokens valued in the billions of dollars. The total market cap of “utility NFTs” has increased massively this year, and this is just the start. Only Immutable X is positioned to handle this scale without compromising asset security.

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