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ERC-721 is a free and open standard on the Ethereum blockchain that makes up the basic rules and conventions that dictate how many non-fungible tokens (NFTs) function.
While ERC-721 isn’t the only token standard for NFTs, it’s the most popular, especially if you include slight variations such as ERC-721A and ERC-721R.
Unlike ERC-20 tokens that are identical to each other (fungible) and can be used interchangeably, ERC-721 tokens are unique and not mutually interchangeable thus, they are non-fungible.
To illustrate this concept, consider a $10 note, which is fungible – one can be exchanged for an identical copy.
On the other hand, a concert ticket or a collectible card is non-fungible – each is unique in its characteristics and cannot be exchanged on a like-for-like basis.
ERC-721 tokens bring this concept to the blockchain, encapsulating distinctive details about an asset that can be immutably stored on the blockchain.
NFTs can digitally represent unique assets, such as one-of-a-kind artwork, with ownership that is easily verified through blockchain records, effectively countering counterfeiting.
How ERC-721 Came Into Being
In the early days of blockchain, tokens functioned predominantly as currencies, stores of value, or forms of equity.
The introduction of ERC-721 by William Entriken and Dieter Shirley, proposed through an Ethereum Improvement Proposal (EIP), revolutionized this notion, creating tokens that were verifiably unique and could be associated with unique content – from art and music to virtual goods.
After undergoing the EIP rigorous review and revision process, the ERC-721 specification was accepted by the Ethereum community and became the foundation for the creation of NFTs.
With the advent of CryptoKitties in late 2017, a game that used the beta version of ERC-721, the potential of ERC-721 tokens and NFTs gained widespread recognition.
Use Cases of ERC-721
The potential applications of ERC-721 tokens extend far beyond digital artwork. Although art remains a prominent use case, NFTs can represent a vast range of unique assets.
In the gaming industry, for instance, ERC-721 tokens can be used to represent unique in-game assets. For example, the online game Gods Unchained uses NFTs to represent digital cards, which players can trade or use in battles.
Beyond digital art and gaming, NFTs can also have real-world applications. For instance, the deed to a house could be minted as an NFT to streamline real estate transactions and ensure easy ownership verification, or an NFT could be used to represent ownership of high-value physical assets like luxury watches or supercars.
The Future of ERC-721
ERC-721 laid the groundwork for the vast landscape of NFTs that we see today. While it may have its limitations, such as lack of interoperability with other token standards like ERC-20 (which was solved by ERC-1155), and the potential to cause network congestion due to its size, ERC-721 will undoubtedly continue to play a significant role in the future of NFTs.
In particular, ERC-721 tokens are well-suited to applications at the intersection of blockchain and real-world assets like property, digital identity, and commodities.
This potential to tokenize unique assets and enable verification of ownership using blockchain technology marks a significant shift in how value and ownership can be represented, transacted, and stored.
As other blockchains like BNB Chain and Avalanche develop their NFT standards, many of which are based on ERC-721, the future of NFTs is only limited by the ability of thousands of innovative developers to discover new and innovative uses for this transformative technology.
The promise of ERC-721 tokens, therefore, lies in their potential to create entirely new business models and ways of transacting – shaping the future of the blockchain landscape and beyond.
The Bottom Line
In conclusion, the ERC-721 standard has already brought a significant revolution in how we represent, trade, and verify unique assets in the digital world.
The standard’s future holds even more potential as more innovative use cases continue to emerge, transforming the very notion of digital ownership.
