Non-Fungible Tokens (NFTs) have erupted into a $10 billion industry, sparking a wave of global disruption. At the heart of NFTs lies blockchain technology that has given a new shape to the collectible market. Understanding different standards of creating a digital artwork on a distributed ledger will help clear the nuances of each type of NFT and the various blockchain protocols involved.
In this blog post, we will cover several standards currently available on the Ethereum network for creating an NFT. But, first, let’s give you a brief overview of the Ethereum blockchain.
Ethereum – The First Blockchain to Allow the Creation of NFTs
Ethereum is the second popular blockchain network after Bitcoin in terms of market cap. Its founder, Vitalik Buterin, created it to broaden the use case of a blockchain. Up until Ethereum, blockchains were majorly used for creating digital currencies, aka cryptocurrencies. However, Vitalik saw an opportunity and added the concept of EVM (Ethereum Virtual Machine) that would allow the creation of smart contracts, decentralized applications, decentralized autonomous organizations, and NFTs. Since we are talking strictly about NFTs, Ethereum provides different standards for creating a non-fungible token that is unique, distinguishable, and has the security and transparency of a blockchain network.
ERC-721 is one of the oldest and most commonly used token standards for creating NFTs. It is non-fungible in the sense that each token created using ERC-721 standard is unique and can be priced independently. It is the very reason unique digital items including artwork, music, card collection, etc., can be stored on such a token. Since each token is rare and cannot be destroyed or duplicated, they are widely accepted as a collectible. Moreover, this token standard provides a mapping of unique identifiers to addresses, which can then be used to verify the identity of the real owner behind an artwork.
Though both ERC-998 and ERC-721 are similar in the sense that they are non-fungible, the former is composable. It means that assets stored within ERC-998 can be composed or organized into complex positions, which then can be traded using a single transfer of ownership.
Furthermore, this type can hold both unique NFTs and uniform fungible tokens (read ERC-20) and can be valued or traded as per the contract. As ERC-998 standard can own a unique set of artwork, it can be used as a portfolio of collectibles or as a holding company for a diverse range of digital assets.
The latest standard on Ethereum blockchain, ERC-1155 allows users to create and register fungible (read ERC-20) and non-fungible (ERC-721) tokens using one address and smart contract. It is mostly used in games where fungible tokens are required to represent a transactional currency while the NFTs are used to represent in-game collectibles. Also, ERC-1155 enables developers to make the massive transfers of the tokens to reduce the congestion of the network, as well as, save on the transaction fees.
While there have been other proposals like ERC-1190 for creating NFTs, the community hasn’t approved them so far. The above-listed are the ones currently being used by innovators and artists around the world for developing a non-fungible token standard. In the near future, we may see even better standards rolling out for NFTs.
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