What Is ERC 721 Token?
ERC-721 is an Ethereum token standard that’s used to create non-fungible tokens (NFTs) on Ethereum.
Unlike conventional cryptocurrencies, ERC-731 tokens can’t be directly exchanged for each other. They’re differentiated with unique attributes, including images, age, order, rarity, and other attributes customized by the creator (also called metadata). This results in illiquid tokens with widely different market values.
The ERC-721 standard differs a lot from the classic ERC-20:
The main Ethereum standard is ERC-20. This means all tokens with the same token standard are equivalent and interchangeable (like trying to swap 1 ETH for another 1 ETH).
For example, Ethereum has a supply of 120M tokens. The first ETH token has the same properties as token 100,048,267 of 120,000,000, and they can be exchanged for the same value (AKA fungible).
Generally, fungible tokens (ERC-20) are used as currencies and NFTs (ERC-721) as digital assets. The latter may represent digital art, game assets, event tickets, tokenized real-world assets, and other collectibles.
The last group is semi-fungible tokens (SFTs, ERC-1155). These combine the first two types and can swap between one another. For example:
- In-game loot boxes all cost the same [ERC-20], but once bought and opened, the item has a different value [ERC-721] (quoted in ETH).
- In-game items [ERC-721] could be sold or “smelted” back to ERC-20 tokens or materials with fixed prices.
The Inventor of ERC-721
The ERC-721 standard was inspired by earlier projects such as Cryptopunks (2017) and Quantum (2014). Rather than an invention, it’s an implementation of NFTs for Ethereum.
William Entriken, Dieter Shirley, Jacob Evans, and Nastassia Sachs introduced this standard in the Ethereum Improvement Proposal (EIP) no.721, which was drafted in 2017 and approved in 2018 after going through a thorough approval process:
Key Features of ERC-721 for NFTs
These are the defining features of ERC-721 (NFTs):
- NFTs record the full ownership history in the blockchain.
- Every NFT is unique, even if they belong to the same group or creator.
- NFTs support diverse metadata, including name, image, and other customizable attributes.
Note: These features aren’t exclusive to Ethereum NFTs. Other blockchains use token standards equivalent to those of the ERC-721: SPL for Solana, BEP-721 for BNB Smart Chain, and so on.
How To Create ERC-721
Here’s a broad overview of the simplest way to create ERC-721 NFTs:
- Connect to an Ethereum NFT marketplace (e.g., Opensea)
- Select Create or Upload to add all the information: media assets, price, metadata
- To ensure secure and decentralized storage, users can upload images via IPFS and add the external URL to the ERC-721
- Before creating the token, a smart contract will appear to sign up and publish it on the blockchain
- Once the transaction is completed, the NFT will be live on all marketplaces from that blockchain
There are alternative ways to create ERC-721 contracts to further customize the NFT behavior, which is configured with developer tools like OpenZeppelin, Hardhat, and Remix.
Understanding the Functionality of ERC-721
“The ERC-721 token enables the storage of NFT details through smart contract metadata, a series of fields that can be queried to return specific and unique details about the digital asset.”
– Barrington, S., & Merrill, N.
The novel features of the ERC-721 standard bring a wide array of use cases, such as:
- Simplify the ownership transfer of physical assets (real estate, even tickets…)
- Secure the transfer of digital assets (in-game items, domain names…)
- Support the protection of intellectual property rights
- Tokenize yield-generating assets from the real world
- Verify platform access and memberships
Since 2018, ERC-721 tokens have solidified as a promising cryptocurrency class with countless new applications to come.
Barrington, S., & Merrill, N. (2022, September). The ‘Fungibility’ of Non-Fungible Tokens: A Quantitative Analysis of ERC-721 Metadata. Arxiv.org.
https://arxiv.org/pdf/2209.14517
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