Have you heard of ERC721, a new standard for non-fungible tokens?
If not, don’t worry! Below we explore the ERC721 token standard, compare it with the more familiar ERC20, and dive into the world of non-fungible tokens (NFTs).
What is the ERC721 Standard?
ERC721 is a token standard on the Ethereum blockchain, just like ERC20. But unlike ERC20, the ERC721 standard is designed for non-fungible tokens (NFTs).
While ERC20 tokens are interchangeable and identical (like traditional currency), ERC721 tokens represent unique assets, such as digital artwork, collectibles, and virtual real estate.
The ERC721 standard was proposed in 2018 and quickly gained traction as the go-to standard for NFTs. It defines a set of rules that a smart contract must follow to manage, transfer, and track unique tokens on the Ethereum blockchain.
ERC20 vs. ERC721: What’s the Difference?
To better understand the differences between ERC20 and ERC721 tokens, let’s look at their key properties.
Fungibility
The primary difference between ERC20 and ERC721 tokens lies in their fungibility. Fungibility refers to the interchangeability of assets or goods. For example, if you have a $10 bill, you can exchange it for another $10 bill or two $5 bills, and the value remains the same.
ERC20 tokens are fungible, meaning they are interchangeable and have the same value. This makes them suitable for use as digital currencies, utility tokens, and governance tokens.
On the other hand, ERC721 tokens are non-fungible. Each token is unique and cannot be exchanged on a one-to-one basis with another token. This makes them ideal for representing digital art, collectibles, and other unique assets.
Token Standards
ERC20 and ERC721 tokens follow different token standards. ERC20 is a widely-adopted standard for fungible tokens, with a set of six mandatory functions that a smart contract must implement to manage the tokens. These functions include transferring tokens, checking token balances, and approving transactions.
The ERC721 standard, on the other hand, has a more complex set of functions to manage unique tokens. It includes functions for token ownership, metadata management, and token enumeration. This allows for the creation, transfer, and tracking of unique tokens on the Ethereum blockchain.
Use Cases
As mentioned earlier, the use cases for ERC20 and ERC721 tokens are quite different. ERC20 tokens are commonly used as digital currencies, utility tokens (e.g., for accessing a platform or service), and governance tokens (e.g., for voting on protocol changes).
ERC721 tokens, however, are primarily used for digital collectibles, digital art, and virtual goods. Some popular examples of ERC721 tokens include Crypto Punks, Decentraland’s virtual land parcels, and various digital art marketplaces.
The Rise of ERC721 NFTs
In recent years, the ERC721 standard has gained significant popularity due to the rise of NFTs. NFTs have opened up new possibilities for digital artists, musicians, and creators to monetize their work in ways never before possible. They have also created new markets for digital collectibles and virtual goods.
Some popular platforms that utilize the ERC721 standard for NFTs include:
- OpenSea: A decentralized marketplace for buying, selling, and trading NFTs.
- Rarible: A platform for creating, selling, and collecting digital art NFTs.
- SuperRare: A high-end digital art marketplace that focuses on limited-edition, single-edition NFTs.
The ERC721 Token Standard is a New Era in the World of Digital Assets
The ERC721 token standard has brought about a new era in the world of digital assets. By enabling the creation and management of unique tokens, it has opened up new possibilities for artists, collectors, and investors alike.
Whether you’re interested in digital art, or virtual real estate, or just want to learn more about the exciting world of NFTs, the ERC721 standard is worth exploring.
As the popularity of NFTs continues to grow, it’s likely that we’ll see even more innovative use cases for the ERC721 standard in the coming years.