What is ERC-721? The standard behind non-fungible tokens

ERC-721 is a token standard on the Ethereum blockchain designed for creating non-fungible tokens (NFTs). Unlike fungible tokens (such as ERC-20), which are identical and interchangeable, ERC-721 tokens are unique and indivisible, making them ideal for representing ownership of distinct digital or physical assets like art, collectibles, and real estate.

Key features of ERC-721

  1. Non-fungibility: Each ERC-721 token has a unique identifier, distinguishing it from every other token in the same contract.
  2. Indivisibility: ERC-721 tokens cannot be divided into smaller units; they must be traded or transferred as a whole.
  3. Ownership tracking: Ownership of an ERC-721 token is recorded on the blockchain, ensuring transparency and security.
  4. Metadata support: ERC-721 tokens can include metadata, such as descriptions, images, or other properties, to represent the underlying asset.
  5. Interoperability: Compatible with Ethereum wallets, dApps, and marketplaces, facilitating widespread use.

How ERC-721 works

  1. Unique token IDs: Each token in an ERC-721 contract is assigned a unique ID (uint256), which differentiates it from other tokens.
  2. Smart contract-based: The tokens are managed by a smart contract that implements the ERC-721 standard, enabling features like minting, transferring, and burning.
  3. Ownership functions: Functions like ownerOf() allow users to check the current owner of a token.
  4. Transferability: Functions like safeTransferFrom() ensure tokens are transferred securely between addresses.

Differences between ERC-721 and ERC-20

FeatureERC-721ERC-20
FungibilityNon-fungibleFungible
DivisibilityIndivisibleDivisible
Use casesArt, collectibles, NFTsCryptocurrencies, DeFi
UniquenessUnique token IDsIdentical units
MetadataSupports unique metadataNo unique metadata

Use cases for ERC-721

  1. Digital art: Artists can tokenize their work as NFTs, ensuring verifiable ownership and provenance.
  2. Collectibles: Projects like CryptoPunks and Bored Ape Yacht Club use ERC-721 to create unique digital collectibles.
  3. Gaming: In-game items, characters, or assets can be tokenized using ERC-721, allowing players to own and trade them.
  4. Real estate: ERC-721 can represent ownership of physical properties or fractional real estate investments.
  5. Domain names: Blockchain-based domain services like ENS (Ethereum Name Service) use ERC-721 tokens to represent domain ownership.

Benefits of ERC-721

  1. Uniqueness: Ideal for assets where uniqueness or scarcity is essential.
  2. Provenance: Blockchain-based records ensure that ownership and history are transparent and immutable.
  3. Interoperability: Compatible with major Ethereum wallets, marketplaces, and dApps.
  4. Decentralization: Ownership is recorded on a decentralized ledger, reducing reliance on intermediaries.
  5. Programmability: Smart contracts enable advanced features like royalties for creators.

Challenges of ERC-721

  • High gas costs: Minting and transferring ERC-721 tokens on Ethereum can be expensive during network congestion.
  • Complexity: Developing and managing ERC-721 contracts requires expertise in blockchain programming.
  • Scalability: Large-scale adoption of NFTs can strain blockchain networks, leading to slower transactions and higher fees.
  • Limited liquidity: Non-fungible assets are harder to sell compared to fungible tokens due to their unique nature.

Popular projects using ERC-721

  • CryptoKitties: One of the first NFT projects, allowing users to breed, buy, and sell unique virtual cats.
  • CryptoPunks: A collection of 10,000 unique pixel art characters that helped popularize NFTs.
  • Bored Ape Yacht Club (BAYC): A high-profile NFT project with exclusive perks for token holders.
  • Decentraland: A virtual world where land and assets are represented as ERC-721 tokens.
  • ENS (Ethereum Name Service): Tokenizes Ethereum domain names for ownership and trading.

How to create an ERC-721 token

  1. Set up a development environment: Use Ethereum tools like Remix, Truffle, or Hardhat.
  2. Write the smart contract: Use the ERC-721 implementation provided by OpenZeppelin, a popular library for Ethereum standards.
  3. Deploy the contract: Deploy the smart contract to an Ethereum-compatible blockchain like Ethereum, Polygon, or Binance Smart Chain.
  4. Mint tokens: Use the contract's mint() function to create unique tokens.
  5. List for sale: Sell or trade your ERC-721 tokens on marketplaces like OpenSea or Rarible.

Other Glossary Terms

DeFi

DeFi, or decentralized finance, refers to blockchain-based apps that offer financial services without banks. It runs on smart contracts, giving users full control over their assets.

Blockchain trilemma

The blockchain trilemma is the challenge of achieving scalability, security, and decentralization at the same time. Learn why it matters — and how projects try to balance the trade-offs.

Crypto Address

A crypto address is a unique identifier used for sending and receiving cryptocurrency on blockchain networks. Linked to a wallet

Public Blockchain

A public blockchain is an open, decentralized network where anyone can participate, validate transactions, and view the ledger. Learn how it works, its benefits, and the challenges it faces in scalability and security.

Circulating Supply

Circulating supply is the number of crypto tokens actively available in the market. It impacts price, market cap, and scarcity, making it a key metric for investors. Bitcoin has ~19.5M BTC circulating, while Ethereum's supply fluctuates.

Block in a blockchain

A block in a blockchain is a digital record that contains a batch of verified transactions, along with metadata such as a timestamp, cryptographic hash, and a reference to the previous block.