What Is ERC-6551? Explaining the New NFT Token Standard
ERC-6551 adds smart contract features to NFTs, increasing their functionality and value.
ERC-6551 tokens are smart contract wallets. That means ERC-6551s, like conventional smart contract wallets, can hold tokens and other NFTs. The same is true for transactions. Token-bound accounts (TBAs) are created and managed using a permissionless registry compatible with existing ERC-721 NFTs.
Benny Giang, a founding member of Dapper Labs, which worked on the ERC-721 token standard and early projects like Crypto Kitties, co-authored EIP-6651.
What Is the ERC-721 Token Standard?
ERC-721 is a protocol for producing one-of-a-kind digital assets on the Ethereum blockchain. These assets are known as NFTs, and they differ from other cryptocurrencies in that each one is unique and cannot be swapped for another one-for-one. NFTs can represent everything from art to virtual real estate, and their worth is determined by criteria such as scarcity or utility. ERC-721 specifies the rules for establishing these tokens, making it easier for developers to generate and exchange unique digital assets on the Ethereum network.
How Does ERC-6551 Function?
The limitation of standard ERC-721 NFTs is their limited scope. They can only be bought and sold. They are not permitted to own other assets, like as tokens or other NFTs. Furthermore, they are unable to communicate with other smart contracts or adapt or evolve over time in response to external circumstances or user inputs.
To address this issue, ERC-6551s employ a permissionless registry that is compatible with existing ERC-721 NFTs. The registry is a smart contract that serves as a TBA factory and directory. By invoking a function on the registry and paying a minimal charge, anyone can create a TBA for any ERC-721 token. The registry then launches a proxy contract that serves as the token’s TBA.
The proxy contract representing the TBA is inherited.
The original ERC-721 token’s attributes and metadata are retained. It also supports the EIP-1271 standard, allowing it to sign messages and verify signatures on the token’s behalf. This allows the TBA to communicate with other Ethereum smart contracts and accounts, such as decentralized exchanges (DEXs), lending services, gaming settings, and more.
Other assets, like as tokens or other NFTs, can also be held by the TBA. These assets can be transferred to or from the TBA by using the proxy contract’s features.
What Are the Applications of ERC-6551 in the NFT Space?
Composability
Composability refers to the ability to combine your NFT with related assets such as other NFTs and tokens into a single profile. Every asset in the ERC-6551 NFT will be transferred if you sell or transfer it.
TBAs, for example, can be used to create “inventories” of game-related materials that can be kept in the ERC-6551 token and significantly improve the user experience of a Web3 game. Prior to TBAs, all assets (NFTs) earned within a game were stored in your wallet as individual tokens.
Identity
Identity denotes that each of your NFTs has its own identity and can interact with DApps on its own. It is not dependent on the wallet that carries it and can be linked to your on-chain identity.
This opens up new avenues for loyalty. Programs or in-game awards that are based on an NFT’s previous conduct. This may have an effect on the value of your NFT because platforms may utilize your NFT’s identity and reputation to establish your creditworthiness or lessen counterparty risks.
Provenance
Beyond proof of ownership, provenance means you can receive a detailed understanding of the asset’s transaction history or utility. Currently, NFTs do not disclose much information on what the NFT has done or how it has been used in the past.
You normally don’t have much information about the buyer or the price if you sold your NFT over the counter. TBAs provide additional in-depth and precise information regarding the NFT’s previous transactions and interactions.
Dependency
Dependency implies that your NFT can interact with other on-chain assets or platforms on its own, increasing its usefulness and value.
An ERC-6551 NFT may possess additional assets or tokens that improve its performance or appearance. It can also communicate with other platforms or smart devices.contracts. This is analogous to the NFT having its own on-chain personality and tale, making it more participatory.
What Are ERC-6551’s Difficulties and Limitations?
Obtaining assistance from current NFT projects and platforms is one of the most difficult hurdles for ERC-6551. Not all NFT projects support the ERC-6551 standard, particularly those that do not use the ownerOf approach, such as CryptoPunks. This means that some of the most popular and lucrative NFTs will be unable to take advantage of the token-bound accounts feature.
Furthermore, some NFT platforms may be unwilling or unable to integrate with the ERC-6551 standard for technical or financial reasons. As a result, ERC-6551 NFTs may not be available to all collectors and creators right away.
ERC-6551 must also be safeguarded because it may give a larger attack surface for hackers if it becomes more popular. ERC-6551 NFTs can own assets and engage with applications, making them more valuable.
appealing targets for hackers looking to exploit weaknesses or loopholes.
Finally, ERC-6551s must have a user-friendly and straightforward interface. ERC-6551 adds another level of complexity and usefulness to NFTs. Users who want to use them efficiently must also gain a new degree of comprehension and awareness. Users may, for example, need to understand how to create, access, manage, and transfer token-bound accounts and assets.
Final Thought
ERC-6551 has the potential to transform the world of NFTs. It provides a smart contract wallet for any ERC-721 token, allowing it to own assets and interact with applications, making NFTs more dynamic and interactive than ever before.
This brings up new opportunities in gaming, art, and identity, but it also introduces new obstacles, such as compatibility and acceptance.
Perhaps ERC-6551 is just what is required to reinvigorate the 2023 NFT market.
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