If ERC-20 is the Ethereum token standard responsible for launching thousands of initial coin offerings (or ICOs), then ERC-721 launches thousands of non-fungible tokens (or NFTs). ERC-721, once the lesser-known cousin of ERC-20, has become a mainstay of the Ethereum ecosystem in this model, the basis for billion-dollar NFTs.
Blockchain is revolutionary because, for the first time, any type of value can be controlled by a computer program. Before the ERC-721 token standard, most tokens on the blockchain were used either as a currency, as a store of value (like gold), or as a stock or equity.
Using ERC-721, verifiable, cryptographically unique tokens can be easily created and linked to unique content, from art to music to sneakers.
What is ERC-721?
ERC-721 is first and foremost a standard: a model or format that other developers agree to follow. Developers follow the same standard because it makes code programming easier, predictable, and reusable.
These standards are entirely voluntary, but following widely used standards indicates compatibility with a variety of applications, including exchanges, decentralized applications (or dapps), and wallets.
ERC-721 is the Ethereum token standard for NFTs. The term “alternative” means “interchangeable” and “replaceable.” Bitcoin (BTC) is fungible because any Bitcoin can be replaced by another Bitcoin. However, each NFT is completely unique. One NFT cannot replace another.
Who invented ERC-721?
The original ERC-721 specification was proposed by Dieter Shirley as an Ethereum Improvement Proposal (or EIP), the process of introducing a new standard to the network.
Anyone can submit an EIP, but it goes through a process of review and iteration before being accepted by the community. Once accepted, the EIP becomes the Ethereum (or ERC) Request for Comment, which is the standard for Ethereum applications. The official authors of the ERC-721 standard are William Entriken, Dieter Shirley, Jacob Evans, and Nastassia Sachs.
The old NFT CryptoKitties project follows the ERC-721 standard. Before the standard was finalized, the kitty collectible card game used a beta version of ERC-721.
A Brief History of the ERC-721 Standard
– September 2017: Dieter Shirley introduces EIP-721.
– December 2017: CryptoKitties became so popular that it congested the Ethereum network, making it incredibly slow.
– December 2017: Launch of NFT OpenSea Marketplace – by 2022, it will be the largest in the industry with $5 billion in monthly sales.
– June 2018: ERC-721 is accepted as “final”, which means that Ethereum developers generally agree to accept it as a standard.
– May 2019: Nike applied for and obtained a patent for the use of the ERC-721 standard.
– February 2020: Launch of Decentraland, a virtual world developed using standard ERC-721 NFTs representing virtual terrain and objects.
– March 2021: Beeple’s “EVERYDAYS: THE FIRST 5,000” sold for $69.3 million at Christie’s.
– December 2021: NFT sales will reach $25 billion in 2021.
What’s so special about ERC-721?
The main feature of ERC-721 tokens is that each of them is unique. When an ERC-721 token is created, there is only one. These NFTs spread the idea and application of unique assets on Ethereum.
Previously, ERC-721 tokens were also referred to as “deeds” (or covenants) because ownership of ERC-721 meant the holder owned the token and the rights it represented.
However, the authors of ERC-721 decided to use the term “non-fungible token” for ERC-721 tokens because the term “deed” is closely related to ownership and there are many possible implementations of NFTs.
How are ERC-721 standard NFTs created?
A token is an independent contract or code on Ethereum. ERC-721 tokens are created by writing a piece of code in a separate contract programming language (such as Solidity) that follows the same model or codebase.
When following the basic model, unique details about the token being created can be determined, such as creator, token name, symbol, etc. Additional functionality can be programmed into your NFT, but what’s really interesting is how the NFT interacts with other independent contracts.
How to get ERC-721 standard NFT?
Buying and storing NFTs has never been easier. Since the start of the NFT boom in 2021, dozens of NFT marketplaces and thousands of NFT projects have sprung up.
In addition to ERC-721, other token standards such as ERC-1155 also support NFTs. However, most NFT buyers are more interested in the NFT itself than the criteria for creating the token.
To buy your own NFT, simply visit well-known NFT marketplaces such as OpenSea and Rarible. Connect to an Ethereum wallet, such as MetaMask, and search until you find an NFT you like that you can keep in your pocket. To buy NFTs, make sure you have enough Ether (ETH) in your wallet and follow the on-screen instructions.
All major marketplaces have intuitive user interfaces, making it easy to buy NFTs with just a few clicks. Additionally, most Ethereum-compatible wallets support the ERC-721 standard. When you buy an NFT, you become the rightful owner and no one can take it away or steal it!
To store your NFTs, you need an Ethereum wallet, either a software wallet like MetaMask or a hardware wallet.
How to handle ERC-721 standard NFTs?
Currently, the most common use case for NFTs is digital art. Users buy these assets for a variety of reasons, including supporting artists, as a long-term investment in anticipation of price increases, quickly transacting NFTs to generate profits, or simply because they appreciate art.
But the use cases for NFTs go beyond art.
NFTs are often used in blockchain-powered games, such as Gods Unchained, to represent unique in-game assets. Online trading card games use NFTs that represent digital cards, which can then be traded to other players or used in battle.
Some blockchain games even allow you to move items to different games. This is the beginning of the metaverse – a continuous virtual environment in which NFTs represent digital objects that can be transferred between different platforms.
Music NFTs are also gaining popularity. Platforms like Audius make it easy for artists to create work in the form of ERC-721 tokens.
Real-world use cases are also starting to emerge. For example, the ability to issue deeds as NFTs to your home to improve the efficiency of real estate transactions. You can also use NFTs to represent ownership of high-value assets, such as Rolex watches.
The future of NFTs and ERC-721 tokens is part of a similar story, but not quite the same.
ERC-721 is Ethereum’s first NFT token standard. It paved the way for the proliferation and use cases of NFTs that exist today. Since the introduction of ERC-721 in 2017, other NFT-compatible token standards have emerged, such as ERC-1155.
These new standards are designed to address some of the major challenges surrounding ERC-721 tokens. For example, ERC-721 has limited functionality when interacting with other standards such as ERC-20.
Also, ERC-721 tokens take up a lot of space on the blockchain. As such, they can cause network congestion and thus high transaction fees, making them prohibitively expensive to acquire.
That said, ERC-721 will have a place in the future of NFTs. While they may not be the best use cases for games and art, they can serve use cases at the intersection of blockchain and real-world assets such as property, digital identities, commodities, and more.
Ethereum is not the only blockchain that supports NFTs. Other independent contract blockchains have emerged in recent years, such as BNB Chain and Avalanche, which host their own NFTs. As a result, new token standards based on ERC-721 have emerged, such as BEP-721 from BNB Chain and SNIP-721 from Secret Network.
Still, ERC-721 is fully functional, helping to tokenize anything unique, from someone’s birth certificate to property, artwork, or rare items in video games.
The most exciting proposals will be to see how ERC-721 tokens can be used in standalone contracts to create entirely new ways of transacting and business models.
NFTs and ERC-721 are still in their infancy. NFTs provide the ability to tokenize anything unique and prove ownership using blockchain technology. It’s a powerful concept that can still be explored a lot. The future of NFTs is only limited by our ability to find new use cases for this technology.
*Translated by Daniela Pereira do Nascimento with permission Decrypt the website.