A digital token designed within the blockchain computer protocol. Each token meets a specific standard. The NFT or non-fungible token is a computer program designed on a specific standard.
This standard will allow each digital possession to be certified and authenticated through the mechanism of Ethereum blockchain. The singularity of a unique token is that its data will integrate a suite of computer codes to generate a smart contract.
It is with a Smart contract that the NFT is distinguishable and acquires a unique and precise destination address. This address will gather all the information relating to the NFT and will allow the ownership of this unique token to be transferred securely. The standard commonly used for NFTs is ERC-721.
What does ERC mean?
ERC means “Ethereum Request for Comment”. The usual standard on Ethereum is ERC-20. It governs the fungible token standard and is used to produce tokens on Ethereum. The fungible token is an interchangeable token. A practical example is cryptocurrency. From one bitcoin to another for instance, each bitcoin has exactly the same value. This is what makes bitcoin a fungible token. Tokens designed under the ERC-20 standard therefore each have the exact same value. As Token under ERC-20 standard, we have bonuses or items in a video game, financial assets such as a share in a company, etc.
The ERC-20 standard thus concerns fungible tokens such as BNB or USDT. Regardless the fact that ERC-721 standard are built on the principle of ERC-20 standard, they are different. It is because tokens that follow the ERC-721 standard come with a transaction history.
What is ERC 721 as NFT standard?
The ERC-721 standard refers to the characteristics of non-fungibility which represents a unique token. This standard is automatically assigned when creating an NFT. The main standard of an NFT will be based on a set of unique token information such as its popularity, its age, its degree of rarity. These characteristics will help assigning the NFT a specific value differentiating it from other non-fungible tokens. Therefore, a unique token cannot be interchanged with another one because they do not have the same value.
Each NFT is assigned a unique data sequence: the “contract” “address” group. This data suite will constitute the globally unique computer variable “uint256” of this NFT or “token Id”.
ERC-721 history as NFT standard
Introduced in January 2018 by Dieter Shirley, William Entriken, Jacob Evans, Nastassia Sachs, ERC-721 is properly the main standard of a unique token. It sets up for a non-fungible token an application programming interface (API) allowing computer programs to connect with each other. With this standard, it is possible to trace all transactions around the NFT, from its transfer between owners to its current value on the market.
As an example of an ERC-721 standardized token, we have the Bored Ape Yatch Club (BAYC). It is a 10,000 unique NFTs collection which unlocks for its holders the possibility of joining the BAYC NFT club. A part from this perk, there are a plethora of benefits increasing with the community commitment.
The collection of 10,000 Cryptopunks is an emblematic NFTs representation of the ERC-721 standard that applies to it. These unique tokens are among the most expensive NFTs on the market.
What is the difference between ERC-721 and ERC-1155?
Unlike the ERC-721 standard which allows the creation and transfer of a single token at a time, the ERC-1155 standard will allow a faster creation and transfer of a multitude of tokens at the same time. It often refers to the “next generation of multi-token standard”. This standard deployed by Enjin simultaneously brings together fungible tokens as well as non-fungible tokens.
Thus, the ERC-1155 standard works on the principle of reducing the information stored on Ethereum. From a single smart contract, an holder of an ERC-1155 token has access to several other tokens, both unique and fungible. The good side of this standard is therefore the great decrease of mint and gas fees, in addition to the smart contract delivery. Its least beneficial side is the difficulty in tracing the data in terms of ownership. This standard therefore does not seem suitable for NFT, because it would not be possible to trace all the information relating to it.
And the ERC-725 standard?
Also belonging to the Ethereum standards, the ERC-725 standard refers to a unique identity listed on the Blockchain. This standard mainly provides, through a smart contract, the description of a group, a human or any entity belonging to the real world. The ERC-725 standard tends to unify and storage any information relating to the identity of a given entity.
One of the major tenets of the ERC-725 standard is self-sovereign identity. It is the fact of giving an individual a full powers over the way they want to manage, present or disseminate their identity data. To sum up, an NFT can easily apply to this long-term standard the way it is today.
What about the new comer ERC-4337?
ERC-4337 is an Ethereum standard based on the principle of account abstraction. In a simplified way, account abstraction allows to set up a recovery logic for a user who has lost his private key. This standard which revolutionizes the use of the blockchain also allows the creation of wallet without security key. In addition, there are also shared wallets, allowing multiple users to conduct transactions from a single account.
The need for account abstraction was born with the numerous losses of security keys or seed phrases of users. Without access to their crypto wallet, it became impossible for them to retrieve their crypto assets, as their security key or seed phrases were no longer in their possession.
Although the private key system allowed them to hold their crypto-currencies, the risk of losing their cryptos remained very high due to the loss of the security key. For this reason, it was necessary to find a solution. The account abstraction then allows the creation of versatile wallets that are equally secure for users. This makes each account equivalent to a smart contract. As a result, more functionalities are added such as multi-signatures, double authentication or other.
On top of that, the ERC-4337 has a decentralized infrastructure called Bundlers. These are validators that will operate and manage user transaction fees in a transaction waiting area within the blockchain.