ERC-721 became famous when CryptoKitties gained their mega-popularity and slowed down the Ethereum. But it has much more value than just a game. What is so unique in ERC-721 standard?
What is ERC-721 token?
The universal standard ERC-20, which works on smart contracts, has become a real event and a turning point in the cryptocurrency world. The ERC-20 tokens currently use 95% of all ICO, as it provides compatibility of cryptocurrencies with each other and with third-party services, such as exchanges. However, there are other types of tokens. The main distinguishing feature of ERC-721 from the usual ERC-20 is that this type of tokens is non-fungible. This property determines the range of potential implementations of the standard. Obviously, unique tokens are best suited for digitizing unique assets.
A large part of ERC-721 functions have the same functions as with ERC-20. This continuity is necessary, at least for the sake of simplicity in the daily use of the coins, since there is a need to store them in ordinary wallets and trade them on exchanges.
But the unique characteristics require the introduction of new functions for smart contracts. Since each token is unique, it becomes necessary to capture the ownership of a particular token in the block, and track its movements. For this, the takeOwnership function appeared.
When you buy some of ERC-20 token, your rights of ownership of it are written in the smart contract – it contains the data of how many tokens each address has after the deal. And this is all – it doesn’t matter which specifically tokens it was. Because they are fungible and all the same.
But the value of one ERC-721 token is not the same as another ERC-721 token. It’s because they are non-fungible and unique. So it wouldn’t be enough just to add an address and a balance to the contract. Each token is unique and we need to know which of them were traded. That’s why in the ERC-721 standard ownership is determined by a list of token identification numbers that is hold on your address.
When you need to create a ERC-20 token, it is a question of the balance of tokens. To create ERC20 tokens, you just need to set how many tokens are available. As to ERC-721’s, we must create each token, because it’s unique. With ERC20, we can easy create a batch of 100 more by adding to the totalSupply parameter. However, since we maintain an array of tokens in the ERC721 standard, we need to add each token to that array separately.
ERC-721 vs ERC-20
The most distinctive difference between these two types of tokens is their fungibility.
- ERC-20 tokens are fungible. This is the «money-like» standard. Each ERC-20 token is completely the same and has completely the same value as others. It’s like dollars – each 5 dollars bill has a value of 5 USD.
- ERC-721 tokens are non-fungible. This is the «things-like» standard. Each ERC-721 token is different from others – it has other characteristics. As Cryptokitties, where every of them is unique.
The main sphere for the application of ERC-721 is of course collecting. But a number of projects are already using this new standard for different purposes. For example, WePower platform is supporting green energy producers, and tokens represent a certain amount of electricity. Each token has a number of parameters, including even the type of the energy produced (for example, solar or wind power).
The Decentraland project is a virtual world where the ERC-721 standard is used to reflect virtual lands. Each site is unique not only by geographical coordinates, but also by other properties, including topography and structures. The sports betting on the CryptoCup detachment, which produces its first tokens for the World Cup, stands apart. This is one of the first experiments on the use of ERC-721 to reflect assets not only unique, but also change their value relative to each other depending on the events of the real world.
James Martin Duffy, the co-founder of the startup LoomX, which is working on scaling the infrastructure for Ethereum, said that the future is in the indirect qualities of game items such as swords, armor and ammunition. According to Duffy, the ERC-721 can also facilitate tracking, trading and managing real-world assets, such as real estate or vehicles. He made plans to develop projects using the standard in the future.
Charlie Lee, the creator of Litecoin, believes that the new standard has opened the possibility to prevent forgery of valuable things and will simplify their transfer without intermediaries.
For the first time Cryptokitties became a synonym for ERC-721. It is not right because the standard of a non-fungible token was invented by Dieter Shirley. He published a draft on September 20th, 2017. And Cryptokitties blew up the world of Ethereum in December. But this game was the first real implementation of ERC-721 token in huge scale. Reminder – you can buy any of the unique cryptokitties, some of them are very rare and very expensive, of course. Then you can sell, change or present them.
After CryptoKitties there were CryptoPuppies with virtual puppies and CryptoPets, where you can select any animal for breeding. And for fans of alternative pixel art, the CryptoPunks application was created, where you can collect and exchange punk heads. Even CryptoCelebrities was created – for trading celebrities, where Vitalik Buterin has the most expensive card. This is only the beginning of the implementation of ERC-721 standard and we will definitely see a lot of new products.