Part 1: A comprehensive beginner guide
Part 2: Non-Fungible Token Standards
Part 3: Distribution methods
Part 4: Metadata
Welcome to our NFT-series, where we explore the exciting world of non-fungible tokens (NFTs)!
NFTs have received substantial attention the past years and provides a new and transparent way for people to trade and collect digital assets on the blockchain. This series will explore the technical underpinnings of NFTs examining topics such as token standards, distribution methods, and metadata. Whether you are blockchain native looking to start your own NFT collection or an investor wanting to understand the technical backgrounds, this series has something for you.
In the second part of our series, we will take a closer look at the different NFT standards, how they compare to one another.
Before we explore the different NFT standards it is important to understand the history behind NFTs and how the standards originated.
A short History on NFTs
2015 marked the launch of the Ethereum network, with it came the introduction of programmable code through smart contracts. A smart contract is a piece of code that autonomously carries out the stipulations of an agreement when specific criteria are satisfied. This development provided developers with a practical platform to create NFT projects. One of the first NFT projects ever launched on the Ethereum network was Etheria, a virtual world where users could purchase land tiles and subsequently build on them. Despite its rudimental graphics Etheria has become a collector’s item as it is part of the Ethereum NFT history, the cheapest land piece will set you back 4.69 ETH (around $8,400 at the time of writing).
Fast forward to 2018 and we saw the release of some noteworthy NFT projects such as Cryptopunks, Mooncats or Cryptokitties (left to right).
Introduction to NFT standards
Before 2017 most NFTs were programmed in the ERC-20 standard, this is the go-to standard for fungible tokens on the Ethereum network however, it is not suitable for non-fungible (unique) tokens. In 2017 a Github contributor by the name of Dieter Shirley proposed the use of the ERC-721 format as the new standard for non-fungible tokens. In this proposal Dieter Shirley also coined the term NFT. The first NFT project implementing the ERC-721 standard was Cryptokitties, nowadays it is the gold standard for NFT formats used by most projects on the Ethereum network. With time other NFT standards emerged each with their own benefits and drawbacks.
ERC-1155 vs ERC-721
ERC-721 is a standard employed for generating non-fungible tokens (NFTs), which are distinctive and not interchangeable. These tokens can represent various unique digital assets such as collectibles, digital artwork, or virtual real estate.
One of the primary advantages of ERC-721 tokens is their high customizability, enabling developers to effortlessly create intricate and one-of-a-kind NFTs. However, ERC-721 tokens have lower efficiency compared to other token standards, necessitating more gas for specific operations. Moreover, they can only represent a single asset type within a contract, which restricts their adaptability.
Conversely, ERC-1155 is a standard for producing semi-fungible tokens, capable of representing multiple assets. It was devised to combine the features of both ERC-20 and ERC-721 standards into a single solution. ERC-1155 tokens are remarkably gas-efficient, particularly for batch transfers, and can represent both fungible and non-fungible assets.
The primary advantage of ERC-1155 tokens lies in their flexibility, as they allow developers to create both fungible and non-fungible tokens within a single contract. However, a notable drawback is that tracking the ownership history of ERC-1155 tokens is more challenging due to the way they are programmed.
NFT Standards on different blockchains
Since blockchain is decentralized there are no enforceable standards or requirements to conform to. This means that blockchains which do not stand in connection with Ethereum (EVM compatible) often use their own NFT standards. Below are just some of the different standards used by other blockchains.
Binance Smart Chain (BSC): BSC has developed its own NFT standard called BEP-721, which is similar to Ethereum’s ERC-721. This standard enables BSC users to create, trade, and manage NFTs within the BSC ecosystem. Due to its compatibility with Ethereum’s ERC-20 and ERC-721 standards, BSC has become a popular alternative for projects and users seeking lower transaction fees and faster processing times.
Solana: The Solana blockchain uses the SPL (Solana Program Library) NFT standard, which is similar to Ethereum’s ERC-721 but optimized for Solana’s high transaction throughput capabilities. This optimization allows Solana to process tens of thousands of transactions per second, making it an attractive choice for NFT projects that require a more scalable solution. The SPL NFT standard also supports advanced features like royalty distributions and metadata storage.
Tezos: Tezos employs the FA2 NFT standard, which shares similarities with Ethereum’s ERC-721 and ERC-1155 standards. The FA2 standard allows for the creation of both non-fungible and semi-fungible tokens on the Tezos blockchain. This versatility enables artists and developers to create complex token structures and support various use cases, including art, collectibles, and in-game items.
As you may notice most blockchains use the ERC-721 and ERC-1155 standard as a reference and adapt it to suit their specific needs.
What the future holds
As technology evolves, we are seeing new and improved token standards. One example of this is the ERC-721A standard, this is an extension of the ERC-721 standard which makes it possible for batch minting NFTs. This reduces the gas fees substantially and makes the process of minting large number of tokens more efficient.
In summary, ERC-721 and ERC-1155 are both useful standards for creating digital assets on the Ethereum blockchain. ERC-721 is best suited for creating unique, highly customized NFTs, while ERC-1155 is better suited for creating semi-fungible tokens that can represent multiple assets. Since blockchain is decentralized there are no enforceable standards or requirements to conform to. This means that different blockchains often have their own NFT standard and we will likely see new standards also on the Ethereum network as technology evolves.