Time to Talk: About New Token Standards

New token standards (ERCs) are emerging all the time expanding beyond the core trio of ERC20, 721, and 1155s . In this article, I'll unpack a few of these new standards and explore how they might be used.

1. Nested NFTs (ERC-7401): Packing More Punch into Your NFTs

Imagine a video game where your character avatar is an NFT that can hold in-game items like weapons as NFTs, or a music album that includes bonus content as sub-NFTs. This is the world of nested NFTs, enabled by the ERC-7401 standard. This opens doors for:

• Bundled NFT sales: Sell a complete character outfit or a musician's entire discography as a single token.
• Exclusive communities: Grant special access or tiered memberships to NFT holders by nesting them within a community token.
• In-game experiences: Create complex in-game characters with unique abilities or items represented by nested NFTs.

2. NFT Wallets (ERC-6651): NFTs with Built-in Backpacks

The current standard for NFTs (ERC-721) has some limitations. Using ERC-6651 allows NFTs to act like mini-wallets. This means one NFT can hold other digital assets, like game tokens or even other NFTs. This could revolutionize how we interact with NFTs in games and business applications. However, there are some security and technical challenges that need to be addressed before widespread adoption.

Let's pause a quick moment and compare how 7401s and 6651s are different. ERC-7401s are often compared to Russian nesting dolls with one doll (or token)fitting inside another. [#supportUkraine]. ERC-6651s are more like a backpack where one item contains many or, one doll contains a bunch of other dolls but they aren't nested, they're more like a barrel of monkeys.

Both of them improve on web2 marketplaces by streamlining the purchase of bundled items as well as offering more control and security compared to centralized platforms.

3. The Royal Tokens for Royalties (ERC-2981, ERC-4920, ERC-721C)

Creators deserve a cut whenever their NFTs are resold. Traditionally, we relied on the various marketplaces to enforce royalties which started centralizing the decentralized market. One token, the ERC-2981, tried to automate this, but not all marketplaces are playing ball. So, two new tokens, ERC-4920 and ERC-721C, shifted the power away from marketplaces and back to creators, giving them more control over their own royalties.

As AI starts to flood the creator space with very-cheap, mass produced "creations" ensuring that human creations are both recognized as authentic and get an ongoing cut of each resale will be increasingly important.

Imagine you wrote a novel. In the traditional system, it's like signing a contract that says you only get a royalty if your book is sold in certain stores, and only if the store owner remembers to pay you. A parallel might be choosing the high-royalty open on the Kindle store. You are handing over a lot of control to Amazon (like the ability to sell the book elsewhere) in exchange for convenience. The ERC-2981 is intended to automatically deduct a percentage royalty for you whenever your book is sold anywhere, but some marketplaces bookstores might still try to avoid paying.

The ERC-4920 & ERC-721C are like writing your name directly into every single copy of your book. Now, anyone who tries to resell it has to give you a cut, no matter where or how they do it. The royalty process is embedded into the transfer.

4. Gasless Minting and Auto-Trading with ERC-4337

This one is especially exciting for start-ups where user adoption is hindered by gas fees. For instance, in a metaverse racing game I was recently exploring, the tokens were only about 35 cents but I needed to approve gas fees of anywhere between $6.50 and $17. This creates a friction point of second-guessing in the acquisition and activation stages and makes for a poor user experience. ERC-4337 paves the way for "gasless" minting and transactions. Of course, someone (like the platform using) would still need to cover the gas fees, but it would happen behind the scenes and could be rolled into one, customer-facing cost.

The ERC-4337 simplifies the process and lowers the fees through "smart accounts." These tokens act like regular crypto wallets but they abstract the technical nitty-gritty for the user, allowing them to interact with tokens more smoothly. People use Web1 and Web2 without needing to understand what's happening behind the curtain. For example, we don't need to understand or even know anything about the FTP protocol to transfer files. We just push "upload/download."

ERC-4337 could also enable user-friendly interfaces where they can define simple trading parameters within the smart account. This would allow anyone to automate basic trading strategies without needing to code.

Imagine minting NFTs without worrying about gas fees. Users could also set up automated trades. Other uses might include things like faster/easier purchase of in-game items by eliminating switching between wallets and confirming each transaction separately. Or, we may see subscription services where the 4337 enables automatic, recurring payments like we see in the traditional Web.