The new standard on the Ethereum network, known as ERC-6551, represents an advancement in the NFT industry as it offers solutions, improved security, streamlined processes, and unlocks new possibilities for users and developers. Today, we will explore what it entails and delve deeper into the topic.
Since 2017, with the introduction of the ERC-721 standard on the Ethereum blockchain and the subsequent tokenization of various digital assets, the path towards mass adoption of this new technology has continued to evolve with new updates in development.
Recently, the new ERC-6551 standard has emerged, but what is it exactly? What improvements does it bring? Is it better than using the ERC-721 standard? In this NFTexpress article, I will provide a detailed explanation of the concepts, features, and implications of this new blockchain update created by Vitalik Buterin, among others.
To begin, non-fungible tokens (NFTs) were initially known for being static images. However, with various innovations in recent years, developers have been able to explore new ways of representing NFTs, ranging from dynamic and interactive elements to game items, music tracks, and even augmented reality functionalities.
With the implementation of the ERC-6551 standard, NFTs will function as “token-linked accounts” and unlock different features for blockchain-based digital assets. This standard was officially launched on the Ethereum Mainnet on May 7, 2023, and several projects are already working to further its development in this field.
Understanding ERC-6551
ERC-6551 is an Ethereum standard for token-linked accounts that creates a smart contract wallet for each ERC-721 NFT. This means that this new protocol does not require any changes to the original ERC-721 contract or any transactions from the owners.
As a result, each non-fungible token under the ERC-6551 standard can possess both ETH and other types of tokens (ERC-20, ERC-721, ERC-1155).
Furthermore, according to the official page eips.ethereum.org, the creators of this new protocol are Jayden Windle, Steve Jang, Benny Giang, Raymond Huynh, Wilkins Chung, Druzy Downs, Alanah Lam, and Paul Sullivan. These individuals are from Future Primitive, a product studio primarily led by Benny and Steve.
ERC-6551 is undoubtedly a significant advancement in the non-fungible token (NFT) industry as it introduces innovative account management within the blockchain ecosystem.
The token-linked accounts under ERC-6551 provide unique solutions to enhance security, process optimization, and new possibilities for users and developers.
To understand it better, for each ERC-721 (NFT), the token generates a smart contract wallet. The asset then becomes a token-linked account, also known as TBA. Token-linked accounts provide NFTs with an interface and a record for account-based ERC-721s.
This transforms each NFT into a wallet that has an integrated origin of ownership, transactions, and utility. Furthermore, as mentioned earlier, token-linked accounts are also backward-compatible with previous versions of the ERC-721 standard. This means that existing NFTs can seamlessly implement the ERC-6551 protocol without undergoing drastic changes.
Finally, token-linked accounts are smart contract wallets that are technically owned by an ERC-721 NFT, but the control of these accounts is delegated to the owner of the NFT. As a result, the NFT owner can initiate on-chain actions using only that token-linked account.
Use cases of the ERC-6551 standard
This new protocol was released less than a month ago and is still emerging in the Ethereum ecosystem. However, there are already some projects that are working on use cases for token-linked accounts (TBA), which are as follows:
On-chain identities: In this first use case, we see how token-linked accounts unlock the possibility for an NFT to have a wallet and all its related assets.
This means that complete identities and reputations can be created through NFTs on the blockchain. Additionally, these non-fungible tokens can interact with DApps directly, rather than with the wallets that hold them.
Some services that could include this new standard are behavior-driven airdrops, loyalty programs, and in-game rewards. These examples clearly can utilize the TBA system.
Game characters: Here, the use cases stem from the composability enabled by token-linked accounts for NFTs.
Before the launch of ERC-6551 and token-linked accounts, players could have their characters as ERC-721 tokens, but the issue was that all the digital assets collected within the game were also separate tokens in the owner’s wallet.
Now, with TBAs, game developers can create inventories for players. This allows all of the user’s assets to be exclusively tied to the game and automatically transferred to their character’s wallet.
NFT Composability: Token-linked accounts are compatible with different NFTs. In other words, it allows an ERC-721 token to be related to other assets and be grouped together in a single ‘profile’ (wallet).
A TBA can be an inventory system that contains multiple types of digital assets. This means it can hold anything from a regular NFT to a collection of rewards in the form of POAP.
Lastly, the grouping of tokens, digital assets, or NFTs in a single TBA will enable users to easily transfer assets. It will also make it simple to switch between platforms (DApps), ultimately providing a much more intuitive user experience when it comes to asset transfers, which is currently lacking in the decentralized industry.
Written by Rodrigo Catalan (TW: @RodrigoCatalanB) for NFT Express.