There are dozens of ERC token standards being used in the Ethereum community these days. These standards govern just about everything you do on the Ethereum blockchain, from transferring tokens to handling non-fungible tokens.
If you’ve dabbled in NFTs, you may have heard of ERC-721 and ERC-721R. What do these two standards do and what are the differences? Read on to find out!
What Are ERC Smart Contracts?
ERC (Ethereum Request for Comments) are essentially blueprints for token development on the Ethereum blockchain network. ERCs contain token standards, name registries, and other elements that blockchain developers can take and use to create their crypto projects without starting from scratch.
ERCs are generally created by the Ethereum community through something called an Ethereum Improvement Proposal, or EIP. EIPs usually outline the functionality of the proposed ERC as well as its specific technical details. If this ERC proposal gains enough support from Ethereum users, then it can be turned into an official ERC and used as a token standard.
One of the most popular ERC smart contract standards is ERC-20, the token standard used to govern the creation of tokens along the Ethereum blockchain. Since this token is used by almost all cryptocurrencies that are created on Ethereum, the ERC-20 standard is also adopted by all major blockchain exchanges to facilitate token trading.
Different ERC smart contracts offer different functionalities. Here are some of the most popular token standards in use today:
- ERC-20: One of the most popular ERCs, the ERC-20 token standard allows the transfer of tokens between users.
- ERC-223: This token standard improves on ERC-20 by fixing a bug that may cause users to lose tokens on accident.
- ERC-721: A non-fungible token standard that governs the use of NFTs as digital assets.
- ERC-1155: A further development of the ERC-20 and ERC-721 token standards that allow a user to keep fungible, semi-fungible, and non–fungible tokens within one smart contract.
- ERC-1238: The token standard used for badges – non-fungible and non-transferable assets usually assigned to a certain user.
What Is The ERC-721 Token Standard?
First proposed in 2017 by Dieter Shirley, Jacob Evans, Nastassia Sachs, and William Entriken in 2017 for their CryptoKitties project, the ERC-721 token standard is the primary standard used for non-fungible tokens nowadays. ERC-721’s key difference over the ERC-20 standard is that each token is unique and non-fungible, making them collectible items.
Nowadays, non-fungible tokens are used in various fields like art, gaming, and even real estate. The uniqueness of this token makes it the perfect digital asset to act as an ownership certificate, signifying that you’re the rightful owner of a certain picture or video clip.
ERC-721 tokens can do things like:
- Keep a record of a token’s owner on the blockchain.
- Transfer an NFT from the owner to another user.
- Allow a third party like NFT marketplaces to transfer tokens on behalf of the owner.
Key Characteristics Of ERC-721
The ERC-721 token standard is the most widely-used standard for creating NFTs. It’s one of the best choices for NFT minting because of its key characteristics like:
- ERC-721 tokens are unique and one of a kind. Their non-fungibility means you can’t trade an ERC-721 token with another one of equal value.
- Ownership of an non-fungible asset means that you own the rights of whatever the token represents.
Common ERC-721 Use Cases
So what are the key applications of the ERC-721 smart contract standard? Some of its most common use cases include:
- Digital art and collectibles: The primary use of ERC-721 NFTs is found in digital art. Artists can sell art pieces bundled with a token that acts as a certificate of ownership.
- Event ticketing: Sporting events or concerts can use NFTs built into tickets to make sure that only the true owner of the tickets can enter the event. This helps prevent ticket fraud and scalpers.
- Authenticity certification: Some luxury goods and products now come with a digital twin – an NFT model of the real-world object it represents. These digital twins act as an ownership certificate that confirms the authenticity of the item.
What Is The ERC-721R Token Standard?
Now that we’ve covered the ERC-721 standard, what exactly is ERC-721R? ERC-721R is a new token standard that’s meant to improve peace of mind among NFT collectors. This token standard allows buyers to return the NFTs they minted and get trustless refunds within a certain period.
The refund functionality means that buyers have more power over their non-fungible assets. If buyers aren’t satisfied about how the creators handle the project, then they can request a refund. In addition to empowering potential buyers, it also helps keep the project team honest and improve their accountability.
What Are The Major Differences Between ERC-721R Vs ERC-721
So what sets ERC-721 apart from ERC-721R? Here are some key differences between the two smart contract standards:
Rug Pull Prevention
The main thing that ERC-721R seeks to do is prevent rug pulls. Rug pulls are essentially scams where unscrupulous project leaders promote a new NFT collection, then disappear with the money they gained from investors.
ERC-721R’s refundability helps buyers avoid a rug pull by giving them the ability to back out during the refund period if they feel that something isn’t right. This way, they’ll only lose gas costs and nothing else.
Accountability From Creators
ERC-721R also gives more power to the buyer, meaning that even if the developers don’t do a rug pull, people may ask for refunds if the project isn’t delivering on its promises. With the possibility of refunding, project developers will be more motivated to listen to their community.
Simply using the ERC-721R non-fungible token standard also increases legitimacy for creators. If they’re not worried about refunds, then they likely have a good track record and nothing unsavory to hide.
ERC-721R expands on one of the most popular standards for NFT minting today by adding the ability for buyers to refund. Increased buyer power means that project teams must be more accountable and be more attentive to their community’s needs.
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