Understanding Non-Fungible Composable Tokens
A non-fungible composable token, precisely the ERC-998 token, shares similarities with the ERC-721 token in that both are non-fungible.
However, ERC-998 tokens are “composable,” which allows users to organize assets into complex hierarchies and trade them with single ownership.
Enabling Complex Ownership Structures
The ERC-998 token represents more than one digital collectible or asset, such as a group of ERC-20 tokens, a collection of unique ERC-721 tokens, a combination of both, or another ERC-998 token.
Moreover, it enables non-fungible tokens to own or be owned by other ERC-721 and ERC-20 tokens.
Unifying Digital Asset Portfolios
Essentially, a non-fungible composable token serves as a portfolio or bundle of digital assets.
These bundles can encompass various tokens, including art, game, sport NFTs, regular ERC-20 tokens, crypto derivatives, and more.
The ERC-998 token unlocks new use cases by connecting multiple components and generating a unified asset.
This capability enables users to compose trees of interconnected ERC-721 tokens and facilitates the sale or purchase of batches of ERC-721 tokens in a single transfer.
Building Composable Tokens
There are two approaches to constructing composable tokens:
- Top-Down Composable: In this scenario, the composable token stores information about its child tokens. Any ERC-721 token can be transferred into a top-down composable token. Think of this approach as a container for ERC-721 tokens. You can store and transfer individual tokens in and out of the container. You can fill the “container” with as many individual ERC-721 tokens as desired and trade or transfer the composable token.
- Bottom-Up Composable: In this scenario, the bottom-up composable tokens store information about the parent tokens. Bottom-up composables can attach themselves as child tokens to other ERC-721 tokens.