A new use case for Ethereum – the ERC721 token
The ERC721 token brings a new token standard to Ethereum called non-fungibility, meaning that digital items and real-world assets can be assigned a unique identifier. The tokens are abbreviated NFT, meaning ‘non- fungible token’.
The current and widely used ERC20 standard has been used for the thousands of tokens created from the Ethereum blockchain protocol. Each token is the same as one another, meaning my token X, is equivalent in value to your token Y. They are not unique, they are one in the same.
The ERC721 standard allows tokens to be created that are unique, meaning my token (or asset) X, is not equivalent in value to your token (or asset) Y.
The new standard
The new standard ERC721 was proposed in late 2017, and was described as “a simple interface for non-fungible tokens, also known as deeds”. Interestingly, the definition for deed is;
“a legal document that is signed and delivered, especially one regarding the ownership of property or legal rights.”
Why this is interesting is it shows the intention of this token standard, which is to provide a framework for digital, immutable and transparent legal records on the blockchain. Why this is exciting, is it opens an entirely new use case for Ethereum and for blockchain technology.
Some of the use cases for this standard described in the EIP (Ethereum Improvement Proposal), are;
- Physical Property
- Virtual Collectables
- Negative Value assets, such as loans, burdens, and other responsibilities
The future of gaming is here
Being a former gamer myself, I particularly enjoyed playing massive online multiplier games, or MMO’s, when I was younger. The attraction was around the value and strength that you, the player, obtained after spending hours upon hours completing quests and gaining loot. The loot part was the most exciting, but what could you do with it outside of that game?
The new NFT standard opens a world of new possibilities with gaming, as the tokens can be used to represent digital items, or loot, and would allow the trading and auctioning of this loot to occur.
Crypto kitties is a recent example, and was one of the first use cases for the NFT standard. These digital cats are created using ERC721, so each cat is essentially a unique token, and allows trading and auctioning of these digital cats. Supply and demand principles dictate prices, and given demand was high for these cats and supply is limited, some sold for upwards of 246 ETH, around $113,000 at the time.
Other more new and exciting projects include Decentraland, which is a VR game in Alpha that uses the NFT as a parcel of land, with the ‘token’ essentially representing the land ownership, or record, which is stored on Ethereum’s blockchain.
Eth town is another game using the NFT standard, and was being developed during the crypto kitties boom. It was interesting that a game which isn’t necessarily a ‘game’ in the traditional sense had such a big impact.
Egor, one of the team members behind Eth Town, said during an interview that;
“Using ERC721 has been pretty cool to use. You own it, you can gift it, you can trade it, the only thing you cant do is hide it”
On the tokens being used within the game;
“In the Eth Town game, there is two ERC721 tokens. These are heroes, which are unqiue, and have different values and charactistics. It can be traded, and there are two main use cases. They can be used for fighting opponents, and secondly, there is equipment which is another ERC721 token. In the fights, the strength is an attribute of the ERC721 tokens (being the heros and the equipment). Secondly, game contracts check the strength of the hero. Each hero represents a single ERC721 token, some are stronger and some are weaker. The genome is actually specified into the ERC721 token contract itself”
Eth town is still in beta phase but is will be going live in the coming weeks.
Records and Registries
The NFT standard can also be used to replace records that are used for ownership of real world assets, such as property.
Propy is a project doing just that, as they are developing a property store and asset transfer platform for real estate to be used globally. Using the NFT standard, Propy will be creating property title records called ‘E-deed’s”, which will be provided to the buyer of a property after parties agree to a sale. This E-deed has built in approval functions, and once approved, will be a permanent and immutable record on the blockchain for the sale of a property. The ‘PRO’ ERC20 tokens used in the crowd sale will be used within the platform to pay for various fees.
Ubitquity are building a platform focused on record keeping, using the NFT token to increase efficiency and transparency for title and property records. Offering a Software-as-a-service platform, Ubitquity is aiming to reduce errors in public records, forgeries, illegal deeds and many other record keeping issues.
Ethereum’s bright future
In summary, the new NFT standard brings a whole new use case to Ethereum, and the projects and use cases for what it might be able to achieve have not even been thought of yet. The code is actually still in draft, yet its inciting value proposition has not stopped several projects from using it already.
New use cases bring new ideas, and new ideas bring new applications. Applications use smart contracts for the back-end, and smart contracts consume GAS to execute functions and logic. GAS is derived from Ether, the fuel that powers Ethereum, so an increase in applications naturally would lead to an increase in the demand for Ether.
Ethereum’s strength as a public protocol can be measured by not just its market cap, foundation, or even its growing list of DApps, but by its willingness to continually innovate and develop new solutions and ideas for what a blockchain and distributed ledger can do.
Despite the ever-increasing competition in the blockchain architecture space, we think Ethereum has a strong and bright future ahead.
Beau is the Founder & Chief Editor at Cryptocurrency Australia Media, an educational platform designed to help anyone learn about cryptocurrency investment and blockchain technology. Beau is also the Founder & Principal Consultant of Blockchain Management Solutions, a specialist technical and project management consultancy, is an advisor with Masternode Ventures, a blockchain incubator, and is an advisor with THORChain, a new decentralized exchange protocol.