Ethereum fans have long been familiar with the ERC20 standard for smart contracts. For those unfamiliar with the standard, ERC20 tokens guarantee that other cryptocurrencies work with other crypto assets in daily life (whether wallets, exchanges, or other dApps). Now a new ERC standard (ERC-721) is enabling ethereum users to manage, own, and trade crypto-based collectibles.
Although non-fungible assets, crypto-based collectibles are becoming immensely popular on the ethereum network (so much so that a dApp named Cryptokitties temporarily congested its network). As a result of the Cryptokitties success, several other collectible-based dApps have come to the fore. Perhaps more importantly, collectible-based marketplaces are finding their footing as well (such as Knownorigin.io, a marketplace for digital artwork). In all, Forbes now pegs the collectibles niche as being upwards of $370 billion.
With so much at stake, the ERC 721 standard comes at a propitious time. How do ERC-721 tokens work with Cryptokitties? As explained in Virtual Currency Report,
“Each CryptoKitty retains an ERC-721 token that is one-of-a-kind and owned by the purchaser; it cannot be replicated, taken away, or destroyed. CryptoKitties can be purchased with Ether in descending-clock auctions. Owners can then “breed” the CryptoKitties, resulting in a completely new CryptoKitty, which is a new one-of-a-kind ERC-721 Token. The “genetic” makeup of the child ERC-721 Token is a combination of the genetic makeups of the two parent ERC-721 Tokens. The ERC-721 Tokens’ uniqueness allows for the creation of a whole new category of crypto creations. The ability for users to combine ERC-721 Tokens to generate completely new, but genetically traceable, ERC-721 Tokens allows for self-sustaining, growth-oriented networks.”
As described above, developers have yet to explore the many use cases for ERC-721 tokens. Indeed, their unique characteristics appear to hold promise for designing innovative dApps far removed from gaming or collectibles.
Given the CryptoKitties success, it was inevitable that this blockchain space would get a second look from dApps developers. As so it has, particularly with trading cards, a physical collectible well-suited to being tracked via the blockchain. Likewise, Ethercraft.io and other gaming companies are quickly taking stock of ERC-721 tokens to examine ways in which they can expand its use case. Expect the ERC-721 standard to get more press as blockchain-based gaming advances and matures.
ERC-721 tokens employ a verifiable authenticity stamp to ensure product authenticity. Moreover, product service and ownership history are immutably recorded with these tokens as well. As such, owners can easily transfer product ownership. Luxury goods are ripe for using such an innovation, whether for luxury handbags or expensive fine art. As ERC-721 tokens gain popularity, brand-conscious consumers may begin to expect them as a complementary item to any high-end product purchase. Such success may even hold promise for upholding intellectual property law.
Given that ERC-721 tokens remain in the early adoption stage, its unknown to what extent they may be employed to solve real-world problems. For Ethereum fans, ERC-721 tokens represent one more exciting opportunity for smart contracts technology.