What is ERC-721? | ERC-721 Explained

Introduction

If you’ve been in the NFT or Web3 space for quite a while, you might have heard the term ERC-721 before, but what exactly is ERC-721, and why is it such an important concept to know?

ERC-721 is a token standard for non-fungible tokens (NFTs), found on the Ethereum blockchain. A standard is similar to a set of guidelines that developers must follow in order to ensure they have the correct code in their contract.

Standards make writing code easier and creates less errors; while still being very efficient. Another benefit that comes with standards is, they make your code simpler as well as easier to read and maintain.

• Standards are also used throughout a variety of blockchain applications, such as decentralized applications (dApps) and exchanges.

Fungible Tokens & Non-Fungible Tokens (NFTs)

Before we dive into both ERC-721 and ERC-20, let’s first clarify the difference between fungible and non-fungible tokens (NFTs).

When a token is fungible, this means that it can be traded or exchanged for another token. Fungible tokens are similar to a store of value such as gold. For example, 1 Bitcoin (BTC) is equivalent to 1 Bitcoin, and when exchanged it does not lose value.

However, a non-fungible token (NFT), is a token that holds a unique set value and cannot be copied or replaced. Meaning that when a non-fungible token is created, there will only be one of that exact token ever created; there can never be two alike or identical NFTs.

ERC-721 & ERC20

ERC-721 is a token standard for non-fungible tokens, before ERC-721, there was another standard, ERC-20. It’s important to discuss the history because the two standards define what it means for a token to be either fungible or non-fungible.

ERC20

In 2015, there was an increase in smart contract popularity, and up to this point, there wasn’t any standard for tokens. So, developer Fabin Vogelsteller proposed ERC-20 in an effort to standardize these tokens within smart contracts on the Ethereum blockchain. Making it a standard for fungible tokens on the Ethereum blockchain. Vogelsteller’s proposal was later approved and implemented in 2017 and was known as the Ethereum Improvement Proposal 20 or EIP-20.

“EIP stands for: ‘Ethereum Improvement Proposal’. EIP is essentially a process that new standards must go through in order to be introduced to the Ethereum blockchain. These standards are then later implemented through the process of Ethereum Requests for Comments (ERC).”

Now any smart contract token that is implemented on the Ethereum blockchain must follow the ERC-20 standard in order to be considered a smart contract standard-compliant token. A few of the most commonly known tokens that implement the ERC-20 standard are:

• USD Coin (USDC)
• Tether (USDT)
• Binance (BNB)
• Chainlink (LINK)
• Shiba Inu Token (SHIB)

ERC-721

ERC-721 is the official standard for non-fungible tokens, implemented in many NFT smart contracts, such as the Bored Ape Yacht Club NFT collection.

However, before ERC-721 was implemented, EIP-721 was first proposed by Dieter Shirley. One of the earliest projects that implemented the EIP-721 standard was an NFT collection known as CryptoKitties. CryptoKitties was also a part of a handful of projects that tested the beta version of the standard. CryptoKitties is a game-based NFT project that was created by Dapper Labs in late 2017, where a user could collect and breed digital kitties.

In June of 2018, ERC-721 was accepted as ‘final,’ meaning it would be accepted by Ethereum developers as a legitimate standard. With ERC-721 now being the official standard for NFT smart contracts.

ERC-721 vs. ERC20

The main difference between ERC-721 and ERC20 tokens is, ERC-721 tokens are non-fungible and individually unique.

Compared to ERC-20 tokens, ERC-721 tokens are a representation of a collection of assets or tokens. Whereas ERC-20 tokens represent a single entity such as 1 BTC or 1 ETH.

Finally, Bored Ape Yacht Club is a prime example of an ERC-721 token that represents proof of ownership that cannot be replicated. This is not possible with ERC20 tokens because of their fungibility.

Conclusion

Although ERC-721 is a relatively newer token standard, it’s just the beginning within the world of blockchain technology.

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