ERC-721 in crypto - Definition

ERC-721 is a standard on the Ethereum network that is used to issue unique tokens.

The main difference between the ERC-721 standard and ERC-20 is the non-fungibility of tokens. Each ERC-721 token is unique and has no equivalent replacement, unlike ERC-20, where all tokens of the same type are identical.

It is this property that determines the scope of application of ERC-721. This standard is best suited for the digital representation of unique assets, such as NFTs, game items, digital art, or ownership rights.

At the same time, much of the logic of ERC-721 replicates the approach of ERC-20. This is done intentionally so that tokens are convenient to use in everyday work: stored in regular crypto wallets and interacted with through exchanges and other services of the Ethereum ecosystem.

Simply put, ERC-721 retains the familiar mechanics of working with tokens, but adds a key property — the uniqueness of each asset.

ERC-20 is the standard for fungible tokens on the Ethereum network.

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Ways to use ERC-721 tokens

1. Art and digital collections. ERC-721 is widely used to issue NFTs with digital art and collectibles. Artists can tokenize their work, making it unique and verifiable on the blockchain. Ethereum-based marketplaces simplify the purchase, sale, and exchange of such tokens and allow creators to interact directly with their audience.

2. Games and virtual worlds. In games and metaverses, ERC-721 is used to own characters, items, and virtual land. Each asset is represented by a separate token that can be transferred or sold. This gives users real ownership of game objects and the ability to dispose of them outside of a single platform.

3. Intellectual property rights. ERC-721 allows you to secure ownership rights to digital works, music, and other content. Creators can sell such tokens directly, and buyers receive confirmation of the authenticity and origin of the asset.

4. Authentication of physical assets. ERC-721 tokens are used to verify the authenticity of physical objects. They are used in supply chains and when working with art, collectibles, and premium goods to track origin and ownership history.

Features and functionality of ERC-721 tokens

ERC-721 tokens differ from fungible tokens in that each one represents a separate unique asset. Such tokens have their own identity and ownership history, which are recorded on the Ethereum blockchain.

1. Ownership tracking. The ERC-721 smart contract always stores information about the current owner of the token. This allows you to verify ownership at any time without the involvement of third parties.

2. Unique token identification. Each ERC-721 has its own tokenId — a unique identifier that distinguishes it from other tokens within the same collection. It is this identifier that makes the token non-interchangeable.

3. Asset metadata. ERC-721 supports working with metadata. This usually consists of links to images, descriptions, or other data that explain what the token represents. The data itself is usually stored outside the blockchain, and the token contains a link to it.

4. Transfer and ownership history. ERC-721 tokens can be transferred between addresses. Each such transaction is recorded in the blockchain, which allows you to track the origin of the asset and use tokens for trading or transferring ownership rights.

Advantages of ERC-721 for NFTs

The ERC-721 token standard provides a number of key advantages for non-fungible tokens (NFTs), making it the go-to solution for unique digital assets in the Ethereum ecosystem.

1. Ownership. ERC-721 ensures secure ownership, transfer, and management of unique digital assets. All transactions are recorded on the blockchain and available for public verification, guaranteeing transparency and authenticity of owner data.

2. Compatibility. The standard provides a unified interface for NFT interaction with marketplaces, wallets, and dApp applications on the Ethereum network, which increases the liquidity and accessibility of tokens.

3. Rarity and uniqueness. Unlike fungible tokens, each ERC-721 NFT has a unique identifier and set of properties. This makes such tokens particularly valuable to collectors, developers, and creators of digital content.

4. Programmability. ERC-721 allows for the integration of additional mechanics: author royalties, game features, dynamic characteristics, and conditions for interaction with other smart contracts.

5. Digital scarcity. Limited supply and an immutable provenance create a digital scarcity effect, which can positively impact the long-term value of NFTs.

6. Intellectual property protection. NFTs based on ERC-721 can serve as immutable proof of authorship and origin of digital works, simplifying the tracking of content usage and the protection of creators' rights.

7. Fractional ownership. Although the ERC-721 standard represents indivisible tokens, it can be used in conjunction with additional protocols and smart contracts to implement fractional ownership, expanding the pool of potential investors.

8. Cross-platform compatibility. Thanks to the broad support of the Ethereum ecosystem, NFT ERC-721 can be used in various applications and services, expanding their use cases.

Together, these characteristics make the ERC-721 standard a versatile and effective tool for implementing NFT projects in the fields of digital art, gaming, metaverses, and asset tokenization.

What actually defines ERC-721

ERC-721 is an Ethereum interface for non-fungible tokens, i.e., assets with a unique identifier that cannot be exchanged one-to-one like fungible tokens of the ERC-20 standard. This standard describes the mandatory functions and events that must be implemented in compatible smart contracts in order for NFTs to be correctly supported by wallets and marketplaces. A detailed and canonical version of the specification is published as part of Ethereum Improvement Proposals under the number EIP-721.

The main components include:

ERC-721 sets the basic rules for working with unique tokens on the Ethereum network and includes several key components.

1. Ownership and balance. The ownerId(tokenId) and balanceOf(owner) functions allow you to determine who owns a particular NFT and how many tokens are at the address.

2. Transferring tokens. The transferFrom and safeTransferFrom methods are used for transfers. The second option is considered more secure when interacting with user accounts and smart contracts.

3. Approvals and access rights. The permission mechanism is implemented through approve, getApproved, and setApprovalForAll, which makes it possible to transfer control of NFTs to third-party services, such as marketplaces.

4. Events and metadata. The Transfer, Approval, and ApprovalForAll events help applications track changes, while the optional name, symbol, and tokenURI fields are responsible for describing the token and its content.

For developers, the easiest and safest way to get started with ERC-721 is to rely on proven libraries. The most commonly used implementation is from OpenZeppelin, which already includes support for metadata and extensions for token listing, reducing the risk of errors and simplifying development.

The minimum interface of the standard looks like this:

interface IERC721 {

event Transfer(address indexed from, address indexed to, uint256 indexed tokenId);

event Approval(address indexed owner, address indexed approved, uint256 indexed tokenId);

event ApprovalForAll(address indexed owner, address indexed operator, bool approved);

function balanceOf(address owner) external view returns (uint256);

function ownerOf(uint256 tokenId) external view returns (address);

function safeTransferFrom(address from, address to, uint256 tokenId) external;

function transferFrom(address from, address to, uint256 tokenId) external;

function approve(address to, uint256 tokenId) external;

function setApprovalForAll(address operator, bool approved) external;

function getApproved(uint256 tokenId) external view returns (address);

// Optional metadata extension

function name() external view returns (string memory);

function symbol() external view returns (string memory);

function tokenURI(uint256 tokenId) external view returns (string memory);

}

For developers, the easiest and safest way to get started with ERC-721 is to rely on proven libraries. The most commonly used implementation is from OpenZeppelin, which already includes support for metadata and extensions for token listing, reducing the risk of errors and simplifying development.

Conclusion

Ethereum token standards continue to evolve. New ERC standards introduce additional features, while previously identified bugs are gradually being fixed. This makes the ecosystem more flexible and expands the use cases for blockchain.

For a platform or product to be useful to end users, it is important to choose the right type of token at an early stage. This determines the logic of the project, the security of interactions, and the convenience for users. Tokenomics — whether it's issuing tokens for business, STO, or data tokenization — plays a key role and requires a thoughtful approach.

Choosing the right standard and correct token architecture helps reduce risks at the start and avoid problems later on.

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