In the dynamic world of blockchain technology, Non-Fungible Tokens (NFTs) have emerged as a groundbreaking innovation, reshaping our perception of ownership, digital assets, and collectibles.
As NFTs continue to gain widespread recognition and adoption, the importance of robust token standards becomes increasingly evident. Introducing ERC-6651, a promising new standard that has the potential to revolutionize the NFT landscape.
For years, Ethereum Request for Comments (ERC) standards have been the foundation of token development and interoperability on the Ethereum blockchain. These standards offer guidelines and specifications for developers to create tokens with consistent functionalities, streamlining their integration into platforms, wallets, and marketplaces.
ERC-20 and ERC-721 have been the most well-known standards for fungible and non-fungible tokens, respectively. However, as the NFT ecosystem evolves, a more comprehensive and adaptable standard is needed to address emerging complexities.
ERC-6651 has risen to the occasion, introducing a range of innovative features and improvements that position it as a game changer for NFT token standards. With an emphasis on enhanced functionality, security, and interoperability, ERC-6651 aims to overcome the limitations of existing standards and pave the way for the next phase of NFT adoption.
What you need to know about ERC-6651
ERC-6551 revolutionizes the capabilities and value of NFTs by equipping them with smart contract functionalities. These tokens, known as ERC-6551s, function as smart contract wallets, enabling them to hold tokens and other NFTs, similar to regular smart contract wallets.
Transactions are also affected by this advancement. Token-bound accounts (TBAs), created and managed through a permissionless registry, seamlessly integrate with existing ERC-721 NFTs.
Benny Giang, a founding member of Dapper Labs, known for their work on the ERC-721 token standard and early projects like Crypto Kitties, co-authors EIP-6651.
It’s important to note that ERC-721 serves as a standard for creating unique digital assets on the Ethereum blockchain. These assets, known as NFTs, differ from regular cryptocurrencies as they are unique and cannot be exchanged on a one-to-one basis.
NFTs can represent a variety of items, ranging from art to virtual real estate, with their value determined by factors like rarity or utility. ERC-721 provides developers with guidelines for creating and trading these unique digital assets on the Ethereum network.
However, regular ERC-721 NFTs have limitations. They can only be owned and transferred, lacking the ability to possess other assets like tokens or other NFTs. Additionally, they cannot interact with smart contracts, adapt based on external factors or user inputs.
To address these limitations, ERC-6551 introduces a permissionless registry compatible with existing ERC-721 NFTs. The registry acts as a factory and directory for TBAs, allowing anyone to create a TBA for any ERC-721 token by invoking a function on the registry and paying a nominal fee. Subsequently, the registry deploys a proxy contract that serves as the TBA for the token.
The proxy contract inherits the properties and metadata of the original ERC-721 token while implementing the EIP-1271 standard, enabling it to sign messages and verify signatures on behalf of the token.
This empowers the TBA to interact with other smart contracts and accounts on the Ethereum network, including decentralized exchanges (DEXs), lending platforms, gaming environments, and more. Moreover, the TBA can hold additional assets such as tokens or other NFTs, facilitating their transfer by invoking functions on the proxy contract.
Why ERC-6551 is Important
The new standard comes with a lot of use cases for NFTs that we have never seen before. Here are a few.
Composability brings the ability to combine your NFT with its associated assets, such as other NFTs and tokens, into a single profile. When you sell or transfer the ERC-6551 NFT, all the assets contained within it will also be transferred.
For example, using TBAs, you can create “inventories” of game-related assets that can be stored within the ERC-6551 token. This significantly enhances the user experience of a Web3 game. Prior to TBAs, all assets (NFTs) collected in a game would exist as separate tokens within your wallet.
Identity introduces the concept of individual identity for each NFT, enabling independent interaction with DApps. It is not reliant on the wallet holding it and can be linked to your on-chain identity.
This advancement creates exciting opportunities for loyalty programs or in-game rewards based on an NFT’s past actions. Additionally, it has the potential to influence the value of your NFT, as platforms may leverage the NFT’s identity and reputation to assess creditworthiness or mitigate counterparty risks.
Provenance ensures that you have access to a comprehensive record of an asset’s transaction history and utility, going beyond the mere proof of ownership. Presently, NFTs offer limited information regarding the asset’s past activities or usage.
When selling an NFT through direct means, such as over the counter, obtaining detailed information about the buyer or the price can be challenging. By leveraging TBAs, you gain access to more insightful and specific details regarding the NFT’s previous transactions and interactions, providing a clearer understanding of its journey.
Dependency signifies that your NFT has the ability to independently interact with other on-chain assets or platforms, elevating its functionality and value. With ERC-6551 NFTs, they can possess additional assets or tokens that enhance their performance or appearance. Moreover, they can engage with various platforms and smart contracts, creating a unique on-chain personality and narrative for the NFT. This heightened interactivity adds depth and richness to the NFT experience.
While ERC-6551 holds great promise for the NFT space, it also faces certain limitations. One significant challenge is garnering support from existing NFT projects and platforms. Not all NFT projects embrace the ERC-6551 standard, particularly those that deviate from the owner method, such as CryptoPunks. Consequently, some of the most popular and valuable NFTs are unable to leverage the token-bound accounts feature.
Furthermore, certain NFT platforms may be reluctant or unable to integrate with the ERC-6551 standard due to technical complexities or business considerations. As a result, ERC-6551 NFTs may not be immediately accessible to all collectors and creators.
Nevertheless, ERC-6551 has the potential to revolutionize the NFT landscape by equipping each ERC-721 token with a smart contract wallet capable of owning assets and interacting with applications. This advancement promises to make NFTs more dynamic and interactive than ever before.