ERC-721 is a token standard on the Ethereum blockchain. It is used to create unique digital assets, also known as non-fungible tokens (NFTs). Essentially, NFTs are assets that can be bought, sold, and collected, just like physical artwork. But what sets them apart is their use of blockchain technology to verify ownership and authenticity.
To understand the ERC token standards and ERC-721 tokens, you must first understand how the Ethereum ecosystem works and how it's much more than a cryptocurrency. Let's take a quick look at that.
What is Ethereum?
Ethereum was launched in 2015 and has become the second-largest cryptocurrency in market cap, next in line after Bitcoin. However, Ethereum is much more than a cryptocurrency. It is also a decentralized, open-source platform that enables developers to build and deploy decentralized applications, also known as "dApps," on its blockchain network. These dApps are built using smart contracts, which are programs stored on a blockchain that run when predetermined conditions are met.
Ethereum continues to be a driving force in the decentralized world of crypto and blockchain technology. Its potential for dApp development has drawn the attention of major industries and institutions, making it a frontrunner in the race for mainstream adoption of blockchain solutions.
So, what are ERC-721 tokens?
First, let's go over some background information on ERC tokens. The Ethereum Request for Comments (ERC) is a set of technical specifications, or a set of rules, that determine how tokens on the Ethereum blockchain behave. These standards allow for interoperability, meaning that different tokens can interact with each other and with dApps built on the Ethereum network.
There are currently several ERC token standards, each with specific functionality and use cases. For example, the ERC-20 token is a widely used standard that defines a common list of rules for all Ethereum tokens to follow, while the ERC-721 standard allows for the creation of unique, non-fungible tokens (NFTs). Let's compare the two.
ERC-20 and ERC-721
ERC-20 tokens are fungible, meaning each token is interchangeable with another. Think of it like a dollar bill - each dollar equals another dollar. On the other hand, ERC-721 tokens are non-fungible, meaning each token is unique and cannot be replaced by another. Think of it like a baseball collectible card - each card has its own value and cannot be swapped with any other card.
So why would someone use an ERC-721 token?
One of the benefits of ERC-721 is that it allows for true ownership of a digital asset. Each token is unique and non-fungible, meaning another token cannot replace it. This opens up potential use cases such as collecting rare digital artwork or owning a virtual real estate property.
Artists can now sell their digital artwork as one-of-a-kind, verified NFTs. This not only allows artists to profit directly from their creations but also combats the issue of unauthorized reproduction and distribution of their work.
NFTs can also be used in the music industry. Singers and musicians can offer their songs or albums as unique, verified digital assets. This opens up new opportunities for revenue generation and protection against piracy. Let’s look at some examples.
- The Canadian rapper Tory Lanez teamed up with the marketplace E-NFT and released his NFT album “When It’s Dark” back in 2021, containing seven exclusive songs displayed as NFTs.
- The Norwegian DJ Alan Walker teamed up with Binance for the release of his NFT collection, containing three music videos of high production value from the album “Origin.” Holders of the NFTs can also earn a share of the revenue from streaming the music videos on YouTube.
"Let's think beyond pictures of animals. Let's think about tracking identity. Let's think about tracking physical assets. Let's think about tracking securable assets and securities, but not fungible securities. Let's think about tracking houses and cars."
Lead author of the ERC-721 token standard, William Entriken
Examples of ERC-721 tokens
One well-known example and the world's first-ever ERC-721 token is CryptoKitties, a virtual game where players can collect, breed, and trade unique digital kitties. Each cat is represented by an ERC-721 token on the Ethereum blockchain and has its own set of characteristics and genetic code.
Welcome to the metaverse! Decentraland is a virtual world where you can create, experience, and monetize content and applications. They use the ERC-721 token standard to represent ownership of virtual land parcels. Several of the world’s biggest companies have claimed land in Decentraland’s metaverse.
- Samsung launched its location earlier this year with the intent to fill it with exclusive branded content, experiences, and items for purchase.
- Coca-Cola launched its first set of NFTs that includes wearable clothing that can be worn in Decentraland’s metaverse.
As the world of luxury increasingly moves online, brands are searching for new ways to connect with their customers and create unique experiences. Gucci has become one most present brands in the metaverse, and the Italian luxury label has launched several NFT collections.
- Bored Ape Yacht Club
Bored Ape Yacht Club is one of the most popular NFT collections using the ERC-721 token standard, with celebrities like Madonna, Tom Brady, and Justin Bieber on the owner's list. Members can access exclusive perks such as private online spaces, exclusive merch, and members-only live events.
The most expensive Bored Ape Yacht Club NFT was sold for $3,408,000.
We learned that ERC-20 are fungible tokens and ERC-721 are non-fungible tokens (NFTs). The ERC-1155 standard provides an efficient solution for transferring both fungible and non-fungible tokens in a single transaction.
So what's the difference between ERC-721 and ERC-1155?
The main difference between ERC-721 and ERC-1155 is the ability to create multiple tokens simultaneously. With ERC-721, each token is unique and cannot be duplicated. On the other hand, ERC-1155 allows the creation of multiple tokens in a single transaction. This means that it's more efficient and cost-effective to use ERC-1155 for things like in-game items or collectibles that come in sets or variations. However, ERC-721 can still be useful for one-of-a-kind items such as real estate or artwork. Ultimately, it depends on the specific use case and the level of uniqueness required for the tokens.
To summarize, ERC-721 tokens offer a unique way to represent and trade digital assets on the Ethereum blockchain, which provides a way for creators in various industries to securely and authentically monetize their digital work. As more projects continue to adopt this standard, we can expect to see even more innovative uses for ERC-721 contracts in the DeFi world.