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The proposed ERC 6551 token standard for NFTs is generating interest among cryptocurrency enthusiasts as it would allow digital assets to hold other tokens, a development that could significantly transform the NFT and metaverse landscape.
Speaking with Laura Shin in a recent episode of the unchained podcastBenny Giang and Jayden Windle, two of the authors of the Ethereum Improvement Proposal (EIP) for ERC 6551stated that this new standard allows NFTs to hold other tokens, essentially equipping them with their own ‘wallets’.
What is ERC 6551?
The standard token proposal, presented in February, focuses on creating a system that assigns each ERC-721 (non-fungible token) a smart contract account. This will allow these tokens to own assets and interact with applications without changing existing infrastructure or ERC-721 smart contracts.
This system consists of two main components: a permissionless registry for deploying token-bound accounts, and a standard deployment interface.
The registry will implement a unique smart contract account for each ERC-721 token, allowing the token to interact with the blockchain, record transaction history, and own assets on-chain. Control of each account linked to the token is delegated to the ERC-721 token owner, allowing them to initiate actions on the chain on behalf of their token.
The proposal seeks to be maximally backward compatible with existing non-fungible token contracts. It also uses EIP-155 chain IDs to uniquely identify ERC-721 tokens, allowing optional support of multi-chain token-linked accounts.
Developer reaction
He initial Developer discussion of the proposal focused on potential security implications, such as the risk of duplicate records and the need for trust verification. Suggestions included creating a registry for a broad registry of account deployments and making the proposal registry canonical due to its permissionless nature.
Potential implications of the proposal for reducing airdrop costs were also highlighted, along with a discussion that also raised security concerns about adding metadata to the NFT registry.
More recently, with more than 160 comments from Ethereum developers, concerns were raised that the proposal is still in “Draft” status, which could see it undergo significant changes. Finally, there were discussions about the finalization of the naming of the functions and the possible impacts on those who implement the EIP.
Benefits of ERC 6551
As Giang explained on the Unchained Podcast, ERC 6551 was triggered by a simple query:
“What if we had a project that was an NFT project that had a character, and we sometimes call it a PFP (Profile Picture) project, right? Our main question was, why can’t you change the clothes or aesthetics of this PFP character?
This question led to the start of the ERC 6551 standard, which allows NFTs to hold other tokens, essentially giving them their own “wallets.”
Giang further added,
“Do you follow the off-chain way where you build a database and have all this kind of centralization where you can represent the NFT? Or it goes the chain way, which is like each item, an NFT can be applied on chain as a transaction.
So through this kind of journey, as we felt in the dark for the last eight or nine months, we realized that there was a potential solution.”
Giang and Windle also discussed the pros and cons of following the on-chain or off-chain method to apply every item an NFT could own as a transaction.
They concluded that the ERC 6551 standard was a potential solution to limitations presented by previous attempts to standardize asset-owning NFTs, such as the need for custom logic in their smart contract. The ERC 6551 standard overcomes these restrictions, granting NFTs the same rights as Ethereum users, allowing them to own assets and take action.
Podcast guests also highlighted that while ERC 721, ERC 1155, and soul-bound tokens exist as ways to own items on Ethereum, ERC 6551 is not a standard token in the traditional sense because it gives every existing ERC 721 its own wallet, therefore unlocking a new layer of compatibility for NFTs.
ERC 6551 Use Cases
The implementation of ERC 6551 has created exciting prospects in various industries, according to the EIP authors. It allows NFTs to autonomously own assets and perform potentially beneficial actions across games, DAOs, infrastructure and tools, and social media.
Giang mentioned several projects like ‘Sapiens’, ‘Fuel Worlds’ and ‘Parallel Trading Card Game’, which take advantage of the standard for gamification. Giang commented, “It makes a lot of sense for a decentralized game inventory.” Such games therefore allow characters to have their own wallets and act independently in the game.
According to Giang, Decentralized Autonomous Organizations, or DAOs, such as ‘Station’ and ‘Dow House’, are also exploring this standard to monitor engagement within their communities. In addition, the infrastructure and tools industry, represented by ‘Manifold’, ‘Nosis Guild’ and ‘Rabbit Hole’, are reportedly working on modules around the standard.
Giang suggested a future in which NFTs could become network playable characters (NPCs), digital entities that can perform on-chain actions controlled by a human or AI model. This could potentially solve the “empty world problem” seen in many digital worlds.
The ERC-6551 proposal, as Jayden Windle explains, is simple.
“A tokenized account, by this standard, is its own type of wallet. Thus, an NFT can have a unique wallet address that can be held by any asset, a concept that Windle describes “gets pretty fractal pretty quickly.”
By this standard, a token-linked account is its own type of wallet. Therefore, an NFT can have a unique wallet address to hold assets. However, it is important to note that while any Ethereum wallet can control an NFT’s wallet, the ownership of the account linked to the token will always be owned by the NFT.
If approved, the advent and application of the ERC 6551 standard could mark a significant development, expanding the functionality of NFTs and improving their usefulness.
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