Since the rise of non-fungible tokens (NFTs), the interest in the NFTs remains high. Non-fungible tokens are designed following the specific blockchain protocol associated with a certain standard.
ERC-721 is a token standard for creating non-fungible tokens (NFTs) within the Ethereum blockchain. ERC-721 allows digital assets to be certified in the Ethereum blockchain. ERC-721 gives tokens a unique smart contract to store their data in. The smart contract generated through ERC-721 gives non-fungible tokens their uniqueness and makes it possible to distinguish them from other tokens in the blockchain.
In this article, we’ll look at the inner workings of ERC-721.
Understanding ERC-721: A Dive into Token Uniqueness
ERC stands for “Ethereum Request for Comment,” while 721 is an identifier number within the Ethereum blockchain.
A default standard for the Ethereum blockchain is ERC-20, used for verifying fungible tokens. Tokens created with ERC-20 are mainly used for transactions or exchanges, as they share the same value.
The idea for ERC-721 was submitted as a proposal within the blockchain, namely the Ethereum Improvement Proposal (EIP). In general, anyone can offer such a proposal. After submission, it will be reviewed. If the proposal is accepted, EIP goes through Ethereum Request for Comment.
EIP-721 consisted of several vital improvements, including:
- Secure transfer function. The secure transfer function made transfers possible to be initiated only by the owner of an NFT or the verified address of the token.
- Standard Interface Detection. This feature allows us to see the interfaces supported by smart contracts.
- Making tokens visible. Anyone can view ERC-721 tokens on the blockchain, as there are no hidden registries whatsoever.
- New tools for wallet, auction, and broker applications.
- Metadata support. Metadata holds unique attributes of tokens that differentiate them from others.
ERC-721 standard was based on ERC-20 but has developed its unique features. ERC-721 is used to create non-fungible tokens that cannot be exchanged for one another, as each NFT is unique. ERC-721 was made for secure minting and transferring of NFTs.
When the non-fungible tokens are created, the ERC-721 standard helps include the data in the smart contract that describes NFTs, like the date of creation, the level of rarity, origin, etc. The data ERC-721 allows to include makes it possible to differentiate digital assets from other non-fungible tokens.
ERC-721 makes possible the creation of non-fungible tokens that are primarily used in blockchain-based gaming for exchange or as collectible pieces of artwork. ERC-721 also ensures secure transferring and minting of tokens.
ERC-721 is also used for secure transferring of tokens between accounts and getting the data about the balance, owners, and supply of digital assets.
Demystifying ERC-721: The Mechanics Behind It
ERC-721 tokens are created using smart contracts on the Ethereum blockchain. Eventually, the smart contract details regulate all aspects of tokens, such as minting, transferring, and burning protocols on the blockchain.
Basically, for minting of tokens, one writes a piece of base code in smart contract programming language. Once the “base code” part is done, one can enrich the contract with specific details, including regulations for token behavior on the blockchain, measures for secure transactions, assigning an owner, indicating supply, providing basic descriptions (metadata), etc. After that, one can deploy the smart contract on the blockchain and proceed with minting new tokens.
When it comes to transferring ERC-721, ownership rights transfer is implied. When one transfers tokens, the smart contract updates the ownership data on the blockchain. Such transfers and their details are visible to anyone within the blockchain, which ensures that the ERC-721 standard provides complete transparency.
As with other tokens, burning ERC-721 digital assets means removing them from the supply. Regarding NFTs, burning is done to increase the demand and value of collectibles or artworks.
ERC-721 Tokens in Action: Real-World Applications
ERC-721 tokens have applications in a lot of areas.
An artwork can become an ERC-721 token. Gaming platforms can use ERC-721 tokens to supply virtual assets within a game. Even real estate is an area in which you can find ERC-721 tokens.
ERC-721 tokens can be used as:
- Music NFTs. Music NFTs became quite popular. Some platforms allow minting their music NFTs with ERC-721 tokens.
- Digital art. The digital art industry is thriving thanks to the ERC-721. This standard allows the artist to digitalize their work. Currently, many digital art platforms allow artists to showcase and monetize their artwork.
- Gaming assets. ERC-721 tokens are widely used in blockchain-based games like Gods Unchained. With ERC-721, you’ll be able to issue in-game exchanges and sell or get virtual assets.
- Unique event tickets. ERC-721 tokens can be used for creating unique tickets for events. Since every smart contract, and thus, token, is unique, ERC-721 makes event ticketing more secure.
- NFT banking assets. ERC-721 can be used as a virtual setting investment. Moreover, some people prefer investing in non-fungible tokens, as users can increase their value over time.
- Virtual real estate assets. In the real estate sector, ERC-721 tokens can stand for unique characteristics of property in a decentralized world. Also, some practice is minting the deed to their property as an NFT.
All of these examples portray how ERC-721 tokens are used nowadays. However, there are many potential applications for the ERC-721 token standard.
For example, ERC-721 smart contracts can be used to store medical data. Some blockchain-based companies are already working on making it a reality. The idea is to pack patients’ medical data in smart contracts for it to be easily transferred between doctors and for patients to monitor their health information easily. Some DNA testing companies offer customers to pay when the company ends up selling their data. This way, customers can see who has their data and, on top of everything, get rewarded.
Collaborative prospects of ERC-721 NFTs are also promising. Some estimate that in the future, it’ll be possible for artists to collaborate on NFTs and offer extras like exclusive perks or merchandise items.
Ultimately, the ERC-721 standard offers one more way to create a unique virtual experience for users.
Concluding Remarks: The Power of ERC-721 Tokens
The ERC-721 token standard is as unique as the virtual assets it forges. As of today, ERC-721 allowed the launching of thousands of NFTs, creating an Ethereum blockchain sector worth billions.
Certain features make ERC-721 unique, among which:
Wholeness and uniqueness of tokens
ERC-721 tokens cannot be split into smaller digital assets. Such tokens represent digital assets with their characteristics and value, ultimately making them authentic. ERC-721 tokens are as whole as they are unique, which makes them viable for embodying artwork and virtual collectibles, virtual real estate assets, gaming assets, etc.
Transparent ownership and transferring
ERC-721 tokens offer transparent ownership and transfer of records on the blockchain. Transferring ERC-721 tokens usually implies exchanging ownership by making secure and decentralized transactions between the addresses on the blockchain.
Smart contract customization options
Third parties cannot customize digital assets existing in the blockchain. However, in the stage of development, creators have the opportunity to define the functionality of the ERC-721 tokens within the framework of a smart contract. This means that unique features or access characteristics can be implemented.
Once the token is created, it cannot be changed. This feature provides an extra level of security and promotes the authenticity of ERC-721 tokens.
Protecting intellectual property
Unfortunately, intellectual property thefts are common. ERC-721 stands in the way of that. This standard allows artists or creators to safely put their work out without worrying about somebody claiming their pieces. ERC-721 enables the record of ownership details and further tracking of the history of NTF transactions.
To conclude, ERC-721 gave rise to new opportunities in the virtual realm, significantly expanding the token application specter. ERC-721 tokens have diverse applications and, undoubtedly, a bright future.