Since the launch of the Ethereum network, cryptocurrencies have become more mainstream, thanks to its ecosystem’s support for tokens to be used in smart contracts. The network has made it simpler to develop tokens to be used for specific tasks through the ERC standards. The most common token standard, ERC-20, has had its fair share of drawbacks. This triggered the development of ERC-721, a standard that applies ERC-20’s basic structure while alleviating its shortcomings by helping to represent and track non-fungible assets.
ERC-721 token standard is applied mainly for developing non-fungible tokens (NFTs). These tokens are neither interchangeable nor have an equivalent, but are valued based on their uniqueness, usefulness or scarceness. Its applications include:
Art: NFTs have opened possibilities for tokenizing works of art. For instance, using NFTs, artists can tokenize their digital work, developing scarceness hence preserving value for their work.
Real Estate: NFTs also allow for dealers of real estate property to develop a unique value for a specific property, since property value may vary for each real-estate property based on many factors including location, size and many more.
Gaming: NFTs are applicable in gaming as in-game items such as collectibles that can be stored in the Ethereum wallet that can then be sold later.
Other applications include copyright, software licenses, loyalty programs, and warranties, even academic degrees!
Tracking non-fungible assets are evidently beyond the scope of the ERC-20 token standard. NFTs developed from the ERC-721 standard fix this problem while creating even more applications for the blockchain technology than we could ever imagine. Here are the advantages:
Uniqueness: ERC-721 enables the uniqueness of each NFT allowing non-fungible assets to attain its unique value. For instance, one painting is different from the other, rare and unique.
Simplicity: ERC-721 simplifies the complex tracking of the value of a property by accounting for all possible factors that would otherwise be difficult in ERC-20.
Representation of Ownership: NFTs, unlike ERC-20 tokens, represent ownership of an investment. Thus, one can own an artwork indivisibly and without losing value.
ERC-721 tokens have opened possibilities for blockchain-based solutions that support indivisible assets. With the ever-expanding reach of the Ethereum ecosystem, NFTs’ applications are set to penetrate to more sectors where they are suitable.