ERC-721
ERC-721: Non-Fungible Token Standard
A checkmarked checklist next to 4 connected puzzle pieces each with a different color & unique barcode, representing ERC-721
ERC-721 illustrated with checkmarks and puzzle pieces representing standardized properties, compatibility and non-fungibility.
Year started2017
First published2018
SeriesEthereum Improvement Proposals (EIP)
AuthorsWilliam Entriken, Dieter Shirley, Jacob Evans, Nastassia Sachs
PredecessorERC-20
DomainNFTs
CopyrightCreative Commons CC0
Websiteeips.ethereum.org/EIPS/eip-721

The ERC-721 Non-fungible Token Standard, is a technical framework, defining a set of rules and interfaces for creating and managing unique, non-fungible tokens (NFTs) on the Ethereum blockchain.[1] ERC-721 is recognized for formalizing the concept of an NFT and establishing the foundation of the multi-billion dollar digital collectibles eco-system that emerged alongside its adoption. It is one of the most widely used NFT standards across use cases and has been utilized in various high profile projects.

The development of the standard was a community-driven effort that was formally published into a paper of the same name in 2018 and is accredited to civic hacker and lead author William Entriken and co-authors Dieter Shirley, Jacob Evans, and Nastassia Sachs. ERC stands for "Ethereum Request for Comments," and is a part of the Ethereum community's peer-review process in which new proposals are considered for publication; the "721" is a unique identifier, each proposal is assigned one arbitrarily after an editor approves it in the draft phase.[2] The blockchain game featuring digital cat artworks known as CryptoKitties is credited with pioneering ERC-721 when it achieved mainstream attention shortly after its launch in 2017.[3]

History

Predecessor “NFT” digital collectibles

The property of fungibility is well described with cash, each unit has the same value no matter which individual one you possess.[4] The concept of blockchain digital assets that could be owned and have the property of non-fungibility pre-dated ERC-721 with projects like Colored Coins on Bitcoin in 2012.[5] In 2017 just prior to ERC-721’s publication, Larva Labs launched the CryptoPunks NFT project on Ethereum using ERC-20 (a fungible token standard). CryptoPunks served as a direct inspiration for ERC-721’s initial drafting.[6] Before ERC-721, commonly traded tokens including some digital collectibles on Ethereum used ERC-20.[7]

Formalizing the term "NFT"

The term "non-fungible token" (NFT) is not known to have been used to refer to NFT projects prior to ERC-721.[8] ERC-721: Non-Fungible Token Standard is credited with formalizing and defining the term NFT.[9] During the standard's drafting phase, lead author Entriken held a vote among the stakeholders where different words were considered including deed, title and asset, but ultimately "NFT" was chosen for the standard's final publication.[10] Use of the term's popularity grew through CryptoKitties, the blockchain game featuring digital cats NFT utilizing ERC-721.[11]

Initial adoption

CryptoKitties

The blockchain game CryptoKitties by Dapper Labs of which the CTO Dieter Shirley is a fellow co-author of ERC-721, is recognized as the earliest pioneering and popular instance of the ERC-721 standard.[12] It utilized an early version of ERC-721 that was not fully compliant with the standard published in 2018.[13] CryptoKitties is regarded as among the first NFT applications to achieve widespread adoption, earning millions of dollars initially and taking up to 70% of Ethereum's usage capacity at its height in some moments.[14]

Su Squares

Launched in 2018 by Entriken and inspired by the Million Dollar Homepage, this NFT project is the first fully compliant demonstration of the ERC-721 NFT standard.[15]

NFT marketplaces

In 2017, one of the earliest and most successful NFT marketplaces, Open Sea, was launched by co-founders Alex Atallah and Devin Finzer who intended to capitalize off of the emergence of ERC-721 NFTs on Ethereum. They initially focused on capturing the market activity around the blockchain NFT game CryptoKitties, which was one of the first use cases of ERC-721, and ultimately planned to scale the platform for other emerging projects utilizing it.[16]

With the introduction of ERC-721, it felt like such an idea was possible for the first time.

— David Finzer, How one company took over the NFT trade – The Verge

The NFT marketplace SuperRare also emerged in 2018 to enable trading of tokens of this standard.[17]

Notable functionality

Custom metadata

ERC-721 implementation requires "name" and "symbol" identifiers, and the token is assigned a contract address upon deployment to the blockchain.[18] Also, a mechanism to implement a URI (Uniform Resource Identifier) to the contract, is defined in the standard, providing functionality to assign each NFT unique metadata.[19]

Trackable ownership

Trackable ownership is the key feature which adds non-fungibility to the ERC-721 standard.[20] Each NFT is assigned a token identification number, and linked to its owner through the "ownerOf" function. Through the optional "ERC-721 Enumerable" extension, functionality for full ownership tracking is implemented. This differs from the ERC-20 token standard, which only tracks an owners token balance though ERC-721 also tracks it as well.[21]

Security

The ERC-721 standard defines both safe and unsafe transfer functions, offering different levels of security for various implementations.[22] These functions allow transfers initiated by the token owner, or an approved operator of their individual tokens. Further, developers can implement custom logic to these transfer functions, providing the functionality for NFT protocols to operate. For example, marketplaces like Opensea, make use of approved operators to facilitate the sale of NFTs.[23]

Influence of work

The influence of the paper ERC-721: Non-Fungible Token Standard that Entriken lead authorship of spans across various sectors, profoundly shaping the landscape of digital collectibles and the use cases within the broader NFT eco-system.[24]

Art world

ERC-721 was awarded rank #1 in ArtReview's Power 100 in 2021 indicating it as "the most powerful art entity in the world" and being the first non-human entity to be ranked as such.[25] The Guardian quoted the review for ERC-721 having "given rise to a whole new generation of collectors and allowed artists to find ways around the traditional gatekeepers of the market."[26]

Beeple's Everydays: The First 5000 Days

In 2021, artist Beeple sold an ERC-721 NFT known as Everydays: the First 5000 Days at Christie’s auction house for $69,400,000 (paid in Ethereum’s native cryptocurrency Ether).[27] It is currently the largest single NFT transaction in history, and the first notable NFT offering by a legacy auction house.[28]

Digital collectibles infrastructures

NFT marketplaces Open Sea, Rarible and SuperRare built their operations to transact ERC-721 NFTs.[17]

In 2021, cryptocurrency exchange Coinbase announced it was creating an NFT marketplace platform to compete with Open Sea that included support for ERC-721 tokens.[29]

Fortune 500 adoption

In 2022, Meta announced NFT support for Instagram for the Ethereum and Polygon blockchains that included the ability to create and sell ERC-721 tokens, referring to them as “digital collectibles.”[30] Support ended in 2023 to focus on other initiatives.[31]

In 2022, Twitter (rebranded currently as X) announced support for Ethereum ERC-721 NFT images to be utilized as profile pictures for Twitter Blue subscribers.[32]

Real estate

A 3-bedroom house in South Carolina was sold for the value of $175,000 through the purchase of an ERC-721 NFT on Ethereum. The NFT effectively acted as a deed for the house in that ownership of it entailed ownership of the house.[33] Applications extending off of ERC-721 for real estate have been proposed including for smart home rentals.[34]

High profile projects

Numerous NFT projects receiving mainstream press coverage have utilized the ERC-721 standard to create NFTs on both the Ethereum and Polygon blockchains. While the term “ERC-721” is cited explicitly in some press coverage, it is not always cited but a project’s usage of it can be verified through an Ethereum blockchain explorer which will identify if a specific NFT is in fact an ERC-721 token; NFT marketplaces may also display blockchain explorer information.[35]

Jack Dorsey’s first tweet

In 2021, Jack Dorsey created an ERC-721 NFT on the Polygon blockchain of his first tweet on Twitter which he sold at auction to Iranian-born crypto entrepreneur Sina Estavi for $2.9 million.[36] A year later, Estavi listed the NFT for auction for approximately $50 million (priced in Ethereum’s native cryptocurrency Ether), but received bids for less than 99% of the value he paid for it.[37]

Bored Ape Yacht Club

Launched by Yuga Labs in 2021, Bored Ape Yacht Club (BAYC) is an ERC-721 based NFT collection on Ethereum featuring 10,000 images of cartoon apes that are procedurally generated by an algorithm. These ERC721 NFTs are often seen as "status symbols" to own.[38] The NFTs function as a membership card to the Yacht Club and an access token to unlock perks and member-only channels. According to Yuga Labs, NFT holders have full commercialization rights to their ape.[39] Over 20 celebrities own or have owned a BAYC NFT including Paris Hilton, Justin Bieber, Shaq, Snoop Dogg and Mark Cuban.[40] Stakeholders involved including Yuga Labs, some celebrity promoters and art auctionhouse Sothebys have each been involved in different lawsuits around the sale, promotion or IP of the NFTs.[41]

The Sandbox

A metaverse game co-founded by Arthur Madrid and Sébastien Borget, The Sandbox, is a virtual world that has been regarded as "virtual real estate" allowing players and brands to build, own, and monetize land and objects via NFT tokens including ERC-721.[42] It has been noted for attracting celebrities as investors like Justin Timberlake and Katy Perry[43] as well as acting as creators utilizing the platform like Snoop Dogg and Paris Hilton.[44] In 2022, the company behind it raised $360 million for a $4 billion valuation.[45] Major brands including McDonald's and Gucci used the platform to create their own metaverse content.[46]

Decentraland

Decentraland is a 3D metaverse platform where ERC-721 NFTs function as deeds to buy and own virtual plots of land.[47] In 2021, an ERC-721 land plot sold for nearly $2.4 million.[48] In 2022 the platform's valuation was over $1 billion while criticisms emerged over low daily active user reports.[48]

Sorare

A fantasy sport cryptocurrency-based video game developed in 2018 by Nicolas Julia and Adrien Montfort, Sorare utilizes ERC-721 NFTs formatted as trading cards of athletes in MLB, NBA and Premier League (its licensed partners).[49] The company raised $680 million to a $4.3 billion valuation in 2021.[50]

Autograph

An NFT platform founded in 2021 by NFL quarterback Tom Brady that features collections from popular celebrities across sports, entertainment and culture utilizing ERC-721 tokens.[51] In 2022, the venture raised $168 million from VC firms Andressen Horowitz and Kleiner Perkins.[52] In 2023 the company announced layoffs for nearly a third of its workforce.[53]

Donald Trump NFT collection

In 2022 former US president Donald Trump announced an ERC-721 NFT collection of 44,000 images each priced at $99 initially and sold out the first day for nearly $4 million despite public criticisms about them.[54]

Market capitalization

In 2021, a total of 44.2 billion in cryptocurrencies was spent in NFT marketplaces using ERC-721 and its derivative standard ERC1155 [55]

Derivative standards

Several months after ERC-721: Non-Fungible Token Standard was published, a semi-fungible token standard was introduced, called ERC-1155, that was intended to expand on the functionality and flexibility of ERC-721's purpose.[56]

The same ERC-721 standard is utilized on the Polygon blockchain.[57]

Out of approximately 85 currently published ERCs (in the "final" state), 7 of them are titled after ERC-721 and serve as a direct extension while almost half of all published ERCs reference, support or extend functionality for ERC-721.[58]

An extension to ERC-721 was proposed to add a significant layer of privacy, Ethereum's co-founder Vitalik Buterin replied to the proposer on Twitter with mixed interest and noted that a challenge was figuring out how to pay fees in such transactions.[59]

Criticisms

The basic version of the ERC-721 standard, as published in ERC-721: Non-Fungible Token Standard, has been criticized by Omar et al for offering limited functionality for the execution of smart contracts associated with NFTs.[60]

Certain NFT use cases demand some features that are not offered by the standard ERC721 and must be created and arranged; such features include the following options: token creation, token deletion, contract access control, and others.

— Ali et al, A review of the key challenges of non-fungible tokens, ScienceDirect

Arcenegui et al points out possible deficits regarding the user in the ERC-721 basic smart contracts and proposes properties to improve and expand its functionality.[61]

Ethereum blockchain's co-founder Vitalik Buterin has criticized popular materialistic use cases of ERC721 tokens as NFTs being "a different kind of gambling" and that he would rather see "funds being used for public goods."[62]

ERC-721 NFTs have been targeted by hackers through social engineering that exploits the setApprovalForAll function, prompting concerns over the ease of theft in certain circumstances.[63]

Legacy

ERC-721 emerged as the first mainstream NFT standard to gain widespread acceptance and popularized the term "NFT" in the nomenclature.[64] It brought significant attention to Ethereum, showcasing the platform's capabilities beyond just financial applications.[17] It inspired the creation of derivative standards on Ethereum and other blockchains, demonstrating its far-reaching influence.[65] ERC-721 catalyzed the development of a multi-billion dollar ecosystem,[55] encompassing a diverse range of digital assets and applications.[60] It became a versatile vehicle for pioneering numerous use cases, including digital artwork, deeds to physical items, virtual real estate, access passes, and game assets.[24] By formalizing and defining the concept of Non-Fungible Tokens,[66] ERC-721 fundamentally changed the landscape of digital verification, authentication, and ownership.[67] This standard represents a paradigm shift in how digital assets are perceived, owned, and transacted, reshaping the digital world's understanding of value and ownership.[68]

See also

References

  1. ↑
  2. ↑
  3. ↑
  4. ↑ "Definition of FUNGIBLE". www.merriam-webster.com. 2023-11-23. Retrieved 2023-11-30.
  5. ↑ Regner, Ferdinand; Schweizer, André; Urbach, Nils (2022), Lacity, Mary C.; Treiblmaier, Horst (eds.), "Utilizing Non-fungible Tokens for an Event Ticketing System", Blockchains and the Token Economy: Theory and Practice, Technology, Work and Globalization, Cham: Springer International Publishing, pp. 315–343, doi:10.1007/978-3-030-95108-5_12, ISBN 978-3-030-95108-5, retrieved 2023-11-25
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  7. ↑ Ross, Dian; Cretu, Edmond; Lemieux, Victoria (2021). "NFTS: Tulip Mania or Digital Renaissance?". 2021 IEEE International Conference on Big Data (Big Data). pp. 2262–2272. doi:10.1109/BigData52589.2021.9671707. ISBN 978-1-6654-3902-2. S2CID 245956102. Retrieved 2023-12-03.
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  13. ↑ Vereš, Igor (April 2019). "Identification of Unusual Transactions in Blockchain Networks" (PDF). Slovak University of Technology in Bratislava, Informatics and Information Technologies.
  14. ↑
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  16. ↑ Brandom, Russell (2022-02-02). "How one company took over the NFT trade". The Verge. Retrieved 2023-11-20.
  17. 1 2 3 Bamakan, Seyed Mojtaba Hosseini; Nezhadsistani, Nasim; Bodaghi, Omid; Qu, Qiang (2022-02-09). "Patents and intellectual property assets as non-fungible tokens; key technologies and challenges". Scientific Reports. 12 (1): 2178. arXiv:2304.10490. Bibcode:2022NatSR..12.2178B. doi:10.1038/s41598-022-05920-6. ISSN 2045-2322. PMC 8828876. PMID 35140251. S2CID 246700675.
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  20. ↑ Ali, Omar; Momin, Mujtaba; Shrestha, Anup; Das, Ronnie; Alhajj, Fadia; Dwivedi, Yogesh K. (2023-02-01). "A review of the key challenges of non-fungible tokens". Technological Forecasting and Social Change. 187: 122248. doi:10.1016/j.techfore.2022.122248. ISSN 0040-1625. S2CID 254394090.
  21. ↑ "NFT Marketplace for Blockchain based Digital Assets using ERC-721 Token Standard | IEEE Conference Publication | IEEE Xplore". ieeexplore.ieee.org. Retrieved 2024-01-13.
  22. ↑ "Implementation of a Blockchain-Based Event Reselling System | IEEE Conference Publication | IEEE Xplore". ieeexplore.ieee.org. Retrieved 2024-01-13.
  23. ↑ "OpenSea Developer Documentation". OpenSea Developer Documentation. Retrieved 2023-11-30.
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  26. ↑ Khomami, Nadia; Arts, Nadia Khomami; correspondent, culture (2021-12-01). "Non-fungible tokens take No 1 spot in influential art world power list". The Guardian. ISSN 0261-3077. Retrieved 2023-11-22.
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  38. ↑ "Bored Ape Yacht Club". Investopedia. Retrieved 2023-11-25.
  39. ↑ Sergeenkov, Andrey (2022-03-23). "What's the Story Behind Bored Ape Yacht Club Creator Yuga Labs?". www.coindesk.com. Retrieved 2023-11-20.
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  53. ↑ Bergman, Ben. "More layoffs hit Tom Brady's NFT startup Autograph, which just cut nearly a third of its workforce". Business Insider. Retrieved 2023-11-20.
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  55. 1 2 Karadag, Bulut; Akbulut, Akhan; Zaim, Abdul Halim (2022). "A Review on Blockchain Applications in Fintech Ecosystem". 2022 International Conference on Advanced Creative Networks and Intelligent Systems (ICACNIS). pp. 1–5. doi:10.1109/ICACNIS57039.2022.10054910. ISBN 979-8-3503-3444-9. S2CID 257313812. Retrieved 2023-11-25.
  56. ↑ Madine, Mohammad; Salah, Khaled; Jayaraman, Raja; Battah, Ammar; Hasan, Haya; Yaqoob, Ibrar (2022). "Blockchain and NFTs for Time-Bound Access and Monetization of Private Data | IEEE Journals & Magazine | IEEE Xplore". IEEE Access. 10: 94186–94202. Bibcode:2022IEEEA..1094186M. doi:10.1109/ACCESS.2022.3204274. S2CID 252094824. Retrieved 2023-11-25.
  57. ↑ "Binance NFT adds Polygon network support to its marketplace". Cointelegraph. 2023-03-08. Retrieved 2023-11-21.
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  59. ↑ Asmakov, Decrypt / Andrew (2022-08-09). "New NFT Privacy Proposal Gets Vitalik Buterin's Attention". Decrypt. Retrieved 2023-11-25.
  60. 1 2 Ali, Omar; Momin, Mujtaba; Shrestha, Anup; Das, Ronnie; Alhajj, Fadia; Dwivedi, Yogesh K. (2023-02-01). "A review of the key challenges of non-fungible tokens". Technological Forecasting and Social Change. 187: 122248. doi:10.1016/j.techfore.2022.122248. ISSN 0040-1625. S2CID 254394090.
  61. ↑ Arcenegui, Javier; Arjona, Rosario; Baturone, Iluminada (2023-08-11). "Non-Fungible Tokens Based on ERC-4519 for the Rental of Smart Homes". Sensors. 23 (16): 7101. Bibcode:2023Senso..23.7101A. doi:10.3390/s23167101. ISSN 1424-8220. PMC 10459112. PMID 37631638.
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  67. ↑
  68. ↑
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