Understanding the Key Differences Between Various NFT Standards

In the burgeoning world of Non-Fungible Tokens (NFTs), it is essential to understand the different standards applied to improve interoperability and distinctiveness of tokens. Put simply, NFT standards are specific rules or guidelines that structure how the token works, operates, and how it interacts with other elements within the Ethereum ecosystem. These standards confer specifics like token metadata, ownership details, and transfer methods.

The Importance of NFT Standards

Standards are critical in the world of digital assets because they ensure a universal language that ensures complete interoperability across multiple applications, platforms, and wallets. The digital community rigorously tests and audits every new standard proposed to ensure its robustness, effectiveness, and safety. Once it’s accepted, developers across the globe can use this standard to create their own unique token.

ERC-721: The First Major NFT Standard

ERC-721 is the first and most common NFT standard. On the Ethereum blockchain, William Entriken, Dieter Shirley, Jacob Evans, and Nastassia Sachs proposed a standard that permits the creation and issuance of non-fungible tokens. An ERC-721 token has a unique identifier and ownership details, which are stored on the Ethereum blockchain. This standard also facilitates easy and safe token transfers between owners.

This standard includes several mandatory rules, including ownership details, token transfers, and access to token metadata, including its name, symbol, and total supply. It also has optional rules that include approving a third-party operator to manage tokens and access to a count of all NFTs assigned to an owner.

ERC-1155: An Improved, Versatile NFT Standard

Enjin introduced ERC-1155, which permits the minting of both fungible and non-fungible tokens. The key innovation is its ability to create any number of both types of tokens using a single contract. This efficiency significantly reduces the gas costs (transaction fees on the Ethereum network) and complexity related to managing and transacting various tokens.

ERC-1155 allows a single contract to produce any quantity of tokens, with each able to have unique characteristics and rich metadata. It also paves the way for batch transfers, which means moving several tokens at once, a feature that increases efficiency and cost-effectiveness.

ERC-998: The Composable NFT Standard

This standard, also known as the Composable Non-Fungible Token Standard, allows users to own multiple NFTs and FTs (Fungible Tokens) in a single contract. These NFTs can be bundled together, creating nested structures of tokens. It offers more flexibility and a broader scope for decentralized applications (DApps).

ERC-998 tokens can hold both ERC-721 and ERC-20 tokens, enabling the creation of complex digital assets like a virtual real estate property with both unique (non-fungible) and divisible (fungible) features.

In Summary

While ERC-721, ERC-998, and ERC-1155 are all NFT standards on the Ethereum blockchain, they offer distinct capabilities and function differently. ERC-721 is the original standard that focuses solely on non-fungible items. ERC-1155 broadened the scope to include both fungible and non-fungible assets under one contract, increasing efficiency and reducing costs. Finally, ERC-998 allows for the creation of complex, composable NFTs, holding both unique and divisible tokens. Knowledge of these key differences is essential for both traders and investors to venture confidently into the dynamic world of NFTs.