NFT Labs: Three Major Protocol Standards of NFT

Three major protocol standards of NFT

The ERC-20 protocol is an earlier and more popular token specification protocol in the Ethereum. It is the standard protocol for fungible tokens.

Up to now, most of the non-fungible tokens are also created on the Ethereum, mainly forming the following three standards:

•ERC-721 - the oldest standard, each token requires a separate smart contract.

•ERC-1155 - pioneered by the team of Enjin Corporation, which proposes a semi-fungible scheme for NFTs. ERC-1155 allows one smart contract to handle several types of tokens. For example, such contracts can contain both fungible and non-fungible tokens, significantly improving transaction efficiency.

• ERC-998 - a new and evolving standard that allows the creation of “synthesizable” tokens and digital assets that “own” another digital asset. This extends to the ERC-721 standard that enables ERC-721 tokens to own other ERC-721 tokens and ERC-20 tokens. For example, in a computer game, ownership of a game character represents one non-fungible token, while ownership of character equipment represents another token. ERC-998 allows users to combine the two into one token.

Note: In addition to Ethereum, there are also NFT standards on the NEO, EOS, TRON, FLOW, Binance and COSMOS.

The standardization of NFTs is crucial, especially in terms of interoperability, which allows this non-tradable token to be transferred between different Dapps. Furthermore, the liquidity issue has been resolved due to the blockchain and Ethereum ecosystem development. The problem of trading is handled by marketplaces such as Rarible or Sorare.

A major difference between FT and NFT is their use of different contract interfaces. The token protocol used by the former is ERC-20, and the latter is ERC-721.

The following is a detailed introduction of several protocol standards:

ERC - 20

The ERC-20 protocol is an earlier and more popular token specification protocol on the Ethereum. If both tokens on the Ethereum platform are issued in ERC-20, they can be freely exchanged. ERC20 is a standard token interface that specifies its basic functions and is convenient for third parties. The open-source system makes the ERC20 standard so simple that an ERC-20 token can be issued in 5 minutes. ERC-20 tokens are under the command of the same set of token contracts, which means that all tokens in the ERC-20 protocol can easily implement functions such as transfer, request, approval, etc., but their functions also have some certain limitations

ERC -721

NFT projects typically use the ERC-721 standard to issue NFTs. ERC-721 has similar properties to ERC-20. The similarity is that digital asset information is kept on the same blockchain. The key difference is that ERC-721 allows the tracking of ownership records for assets with unique characteristics.

Compared with ERC-20, the ERC-721 protocol has more functions and advanced technology. The protocol is Ethereum's first standard for NFT digital assets for non-fungible tokens. It is used in projects such as CryptoKitties and Decentraland. The ERC721 standard was created and published by Dieter Shirley, CTO of CryptoKitties, who can be said to be one of the founders of NFTs.

Although ERC-721 has fewer use cases than ERC-20, and its functions are still being explored, it has the advantage that assets ownership security, immutability and transparency of ownership history (paintings, bonds, houses or cars, etc.) under the ERC-721 protocol can be ensured, and they are easy to transfer. In addition, ERC721 can also facilitate tracking, trading, the trading and management of real assets, and more. With the continuous popularity of virtual game assets, the constant popularity of 5G and VR, and the adoption of blockchain technology, the 721 protocol has a bright future.

ERC - 1155

1. What is ERC - 1155？

Compared to ERC - 20 and other standards, the ERC-1155 token protocol standard is outstanding because it is cross-chain compatible. So far, most of a user's assets have only been available on the Ethereum. However, the ERC-1155 standard also makes their assets compatible with other ecosystems. Operating across multiple blockchains seems to be the only solution.

2. How does ERC-1155 work？

ERC-1155 supports these custom tokens with the local Enjin coin. It ensures that all assets created through this method have a guaranteed value that can be obtained by using the “melt” feature within the Enjin wallet, making tangible value acquisition simpler.

ERC-1155 is very different from traditional tokens and cannot be destroyed directly. Instead, they usually remain in circulation unless the original developer regularly repurchases them. ERC-1155 is positioned as a more specific token standard in that any asset can be created and destroyed at any given time.

The benefit from this is token scarcity. In the ERC-20 protocol, scarcity is almost non-existent. Under the ERC-1155 protocol, the destruction of assets can reduce circulation, improve the overall scarcity, and provide a different type of token protocol than traditional options.

ERC - 998

ERC-998 can create composable and synthesizable NFTs (Composable NFTs, abbreviated as CNFTs). It is designed so that any NFT can own other NFTs or FTs. When you transfer CNFT, you are transferring the entire hierarchy and affiliation that CNFT has. To simplify it, an ERC-998 item can contain multiple ERC-721 and ERC-20 items.

As mentioned above, in computer games, the ownership of a game character represents a non-fungible token, and the ownership of character equipment represents another token. Although the character equipment belongs to the character, this affiliation cannot be reflected under the existing ERC-721 system; if you want to trade, the character and the equipment must be traded separately. ERC-998 allows users to synthesize the two into one token. The synthetic parent token contains the ownership relationship of the two sub-tokens of characters and equipment so as to make it easier to package and sell and greatly simplify the process of transfer of items.