Even while the introduction of non-fungible tokens opens up incredible possibilities, the tokens still require a solid standard to specify what they are actually capable of. The first NFT standard created in 2018 is called ERC-721.
By 2030, it's anticipated that 30% of all customers will be using blockchain as their primary technology. Additionally, organizations that will grow by more than $170 billion by 2025 will benefit more from the blockchain. These figures demonstrate that blockchain will dominate the commercial market in the future.
Imagine paying for a piece of digital art online and receiving a special digital token that verifies your ownership of the purchase. Wouldn't that be wonderful? Well, owing to NFTs, this is possible.
Non-fungible Tokens (NFTs) have caught the imaginations of collectors, investors, and tech enthusiasts alike, and if your interest in NFTs and blockchain technology is expanding, you should learn more about NFT standards. However, if you are unfamiliar with NFTs and want to learn more about them, we recommend starting with our NFT article. The article will provide you with background information to help you comprehend some of the complexities related to NFTs.
What Caused NFTs to Gain Popularity?
NFTs have been present since 2015, but their popularity has recently increased for a number of reasons. The enthusiasm and normalcy of cryptocurrencies and the underlying blockchain frameworks come first and are likely the most evident development. The intersection of fandom, royalty economics, and the rules of scarcity goes beyond technology itself. Every consumer wants to take advantage of the chance to own distinctive digital content and even hold it as a form of investment.
What are NFT Standards?
NFT standards define how to create Non-Fungible Tokens on a specific blockchain system. The well-known ERC-20 tokens, or cryptocurrency tokens developed on the Ethereum blockchain platform, are already well-known to the majority of blockchain enthusiasts. However, there are a number of different Ethereum Request for Comments (ERC) standards that are accessible. NFTs are one of the objects generated on the Ethereum platform that follow the protocol defined by a token standard used by blockchain developers. The first blockchain protocol to design and launch NFTs was Ethereum.
The Golden Standard and the Newbies
Even while the introduction of non-fungible tokens opens up incredible possibilities, the tokens still require a solid standard to specify what they are actually capable of. The first NFT standard created in 2018 is called ERC-721. Within a smart contract, it implements an API for tokens, enabling users to interact with the token and obtain proof of interaction. Today, Ethereum remains the most popular blockchain platform for NFTs. Flow and Tezos, on the other hand, are some blockchain systems that are gaining ground on Ethereum in the NFT arena. Experts believe that these two blockchain technologies will soon surpass Ethereum. The effect of transaction costs on NFT standards and their popularity
All blockchain transactions, whether trading cryptocurrencies or purchasing NFTs, incur a transaction cost. In most circumstances, the transaction cost is negligible. Ethereum transactions are carried out using "gas." "Gas" is related to the open market price of Ethereum. Since its inception, the market price of Ethereum has skyrocketed. As a result, transaction costs on the Ethereum network have become prohibitively expensive for many creators, purchasers, and investors. Nonetheless, Ethereum remains the dominant force in the development and sale of NFTs.
Ethereum Improvement Proposals (EIP)
The goal of all Ethereum Improvement Proposals (EIPs), which take many different forms, is to improve the Ethereum network. Some EIPs advocate for changes to the way the network functions, while others attempt to improve security or performance. Others present fresh uses for Ethereum or add cutting-edge features that enhance its usability. If an EIP is approved following a final evaluation, it is then put into effect on the Ethereum network. To make sure the planned alteration won't affect the network, this procedure also includes a security evaluation and a code audit.
The operation of the EIPs is clearly defined in EIP-001. The creation of the idea or proposal by the EIP author is the first step in this procedure. At this point, the author takes on the burden of development; it is he who must make the essential reasons to support and show the necessity of his proposition. As a result, the EIP's author must develop a well-defined notion and offer it in the EIP's body together with a rationale and supporting details.
EIP standards are broken down into the following subcategories:
Basic: EIPs that call for a consensus change within Ethereum fall under this subcategory. These EIPs, such as EIP-005 and EIP-0101, are two good examples. Nevertheless, improvements that don't necessarily affect the consensus protocol are also included. The latter is demonstrated in EIP-086 and EIP-090.
Social: This section contains enhancements related to devp2p (EIP-8) and the network protocol, such as those suggested to the specifications of the Ethereum swarm and the gossip protocol.
Interface: This section covers changes made to the Ethereum client's API and RPC standards and specifications. Additionally, the corresponding changes at the ABI and API levels are also mentioned.
Several Significant Ethereum Improvement Proposals (EIP)
EIP-606: Hard Fork Goal: Homestead
El EIP-606 is a form of EIP called Meta. This outlines every step required to implement the Homestead upgrade on Ethereum. It makes references to other EIPs that detail all the modifications that will be done because it is an EIP of the Meta type. The following EIPs are invoked by the EIP-606 in this situation:
• EIP-2: Homestead Hard-fork Changes
• EIP-7: DELEGATECALL
• EIP-8: devp2p Forward Compatibility Requirements for Homestead
The modifications that will be made are described in each of these EIPs individually, and when combined, they result in the Homestead upgrade.
EIP-20: ERC-20 Token Standard
Since it was developed to implement the well-known ERC-20 standard token, El EIP-20 is likely one of the most well-known EIPs in the Ethereum community. With this breakthrough, Ethereum started the process of developing a standardised method to deploy tokens on its blockchain. As a result, Ethereum is currently the blockchain with the greatest number of tokens.
EIP-137: Ethereum Domain Name Service - Specification
The Ethereum Domain Name system's specification was created by EIP-137. From here, all the infrastructure required to transform Ethereum into a sizable, wholly decentralised, privacy-focused domain name server (DNS) would be built.
ERC: application level standards and conventions, such as contract standards for tokens (ERC-20, ERC-721, and ERC-1155), name registries (ERC-26, ERC-137), URI schemes (ERC-67), library/packet formats (EIP-82), and wallet formats. EIP-006 is an excellent example of these EIPs (EIP-75, EIP-85). In addition, it would make it possible to transfer and receive cryptocurrency by connecting a readable address to a cryptographic address. The ENS is the result of this study.
EIP-1155: Multi-token standard
The EIP-1155, commonly known as the ERC-1155 token, is a standard EIP that aims to create a new kind of token by combining the features of the ERC-20 and ERC-721 tokens into a single standard. ERC-1155 tokens have both fungible and non-fungible qualities in this way.
EIP-1559: ETH 1.0 Fee Market Change
The goal of this EIP is to alter how commissions are managed within the network. To address this, the EIP-1559 introduces a mechanism for commission burning that keeps Ethereum's inflation from rising while also expanding or decreasing the number of transactions that can be included in a block of Ethereum to reduce network congestion.
EIP-779: Hard Fork Target: DAO Fork
This is possibly the most contentious EIP for Ethereum. He was in charge of "fixing" the multi-million dollar DAO hacking issue with the EIP-779. To accomplish this, EIP rewrote the whole history of the Ethereum blockchain beginning with the instant before The DAO was compromised.
This is done in an effort to return the stolen money to its rightful owners. This hard fork's implementation caused Ethereum to split into two communities, each with its own blockchain. The Ethereum user who applied the fix and the Ethereum user who didn't (Ethereum Classic).
EIP-721: ERC-721 Non-Fungible Token Standard
Because he developed the ERC-721 standard for Ethereum non-fungible tokens, El EIP-721 is another well-known EIP. Projects like CryptoKitties were born on this token.
The ERC721 coins are non-fungible; each token is distinct and has a market price. Because of this, special digital assets like a piece of digital art created by an artist can be saved on such a token. Tokens are one-of-a-kind and cannot be destroyed or copied. Each token might be regarded as a collectible due to the rarity and distinctiveness of its attributes. This established the first non-fungible token standard.
On the Ethereum blockchain, creating non-fungible or unique tokens is outlined in the free, open standard known as ERC-721. The majority of tokens are fungible, meaning that each token is identical to every other token, however, ERC-721 tokens are all distinct. A uint256 ID is used to identify each NFT. They could be transferred using two distinct functions.
The proposed ERC165 interface must be implemented by ERC721 tokens. This standard enables the identification of the interfaces that a contract has implemented. This is particularly helpful since it enables the method or code to interact with a token to be modified in order to determine the interface that a token implements. ERC-20
When ERC-20 was released in November 2015, the network had been up and running for less than five months. It provided a ground-breaking framework for developing and issuing smart contracts.
The foundational functionality needed to "transfer tokens, as well as allow tokens to be validated so they can be spent by another on-chain third party" was supplied by EIP-20, which was proposed by Vitalik and LUKSO founder Fabian Vogelsteller.
The ERC-20 template is the foundation for the majority of tokens currently in use, including the most popular stablecoins on the market, Tether (USDT) and USD Coin, even if numerous other token standards have evolved in the intervening years (USDC). EIP-20 is one of the most significant improvements in the history of the blockchain.
ERC 998 & ERC 1155
The ERC998 and ERC1155 standards are two significant non-fungible token standards on Ethereum that aren't as widely used as the ERC721 standard.
The fact that ERC998 tokens and ERC721 tokens are both non-fungible makes them comparable. Additionally, ERC998 tokens are "composable," which implies that the assets included in this class of tokens can be put together or arranged into complex positions and traded with a single transfer of ownership.
Unique non-fungible tokens (like the ERC721) and uniform fungible tokens (like the ERC998) can both be stored in an ERC998 Token (such as the ERC20). After then, the ERC 998 token can be exchanged and priced. The ERC998 token can be viewed as a portfolio of assets or as a holding corporation for a varied array of assets because it has the ability to own a specific collection of digital assets.
Using the same address and smart contract, users of ERC1155 tokens can register both fungible (ERC20) and non-fungible (ERC721) tokens. The non-fungible things could represent in-game collectibles and exchangeable goods, while the fungible tokens could represent a transactional currency in a game. This token standard was created with games in mind. There are other token standards that have been put forth and are awaiting approval by Ethereum's regulatory body, such as the ERC 1190, which enables the creation of flexible and complicated NFTs.
FA2
Numerous token kinds, including fungible, non-fungible, and multi-asset contracts, are supported by FA2. FA2 allows for the creation of custom tokens and facilitates sophisticated token interactions. FA2 also enables a common API for third-party wallets, games, and programs. NFTs and other interactive, modifiable game objects can be included in FA2 tokens.
Tron
TRC-721 is a token standard that is identical to ERC-721 present on the Tron blockchain. On this network, transaction costs are typically under one dollar. Each TRC-721 token has a unique ID, and users can change the name and ticker to suit their tastes.
Tron blockchain is scalable.
ERC888
This standard is for multi-dimensional tokenization which utilizes identifiers to refer to balances & data.
RMRK
RMRK (pronounced "remark") is a collection of guidelines and requirements for analysing unique data. Tools can perceive information in various ways that an outside observer might be able to by applying a unique interpretation to this data.
| ERC - 20 | ERC - 721 | ERC - 998 | ERC - 1155 |
|---|---|---|---|---|
Proposed Year | 2015 | 2018 | 2018 | 2018 |
Specifications | It is a fungible token used for identical entities | Specialized in non-fungible tokens | Works as an extension of ERC-721 | It is the hybrid between ERC-20 and ERC-721 |
Functions | Used for identical entities, to create and issue smart contracts | Allows developers to tokenize ownership of any arbitrary data, developing and tracking unique NFTs | Works as an extension of ERC-721, permitting you to “compose” a fresh token from a pack of ERC-721 assets | Allows different versions of the same non-fungible token and is effective for use in batch token transfer |
Drawbacks | Lack of transaction handling and potential security issues | High gas fees | Complex to operate | No way to enumerate tokens on-chain. |
Future and Conclusion
Although Ethereum was the first blockchain platform to support NFTs, it wasn't created with NFTs in mind. NFT's first principles were used in the development of platforms like Flow and Tezos. There will undoubtedly be more NFT standards available in the near future.
The next generation of games and media applications will be powered by NFTs, and they may also be useful in applications for digital identity, healthcare, and insurance. When deciding which platform and token standard to use, it's crucial to comprehend the specifics, complexities, and transaction cost structures of each choice.
By 2030, it's anticipated that 30% of all customers will be using blockchain as their primary technology. Additionally, organizations that will grow by more than $170 billion by 2025 will benefit more from the blockchain. These figures demonstrate that blockchain will dominate the commercial market in the future.
The monetization of digital assets will happen, and it will give market players more advantages. Additionally, new players entering the market for NFT and other digital assets will improve the digital economy.
