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The new ERC-6551 standard allows NFTs to essentially be their own wallets, termed "Token Bound Accounts". TBAs enable NFTs to hold and manage various assets, essentially turning NFTs into dynamic entities rather than static assets. This feature facilitates several applications: composability, where NFTs can bundle related assets for easier management and transfer; on-chain identities, where each NFT has its own digital identity for interacting with decentralized apps; provenance, providing a comprehensive transaction history; and dependency, allowing NFTs to interact independently with other on-chain assets, enhancing their functionality and value.
ERC-721, the token standard that introduced NFTs on Ethereum as unique and verifiable digital assets, has gained significant popularity.
However, imagine the possibilities if we could transform our ordinary NFTs into comprehensive Ethereum accounts.
This possibility has become a reality with the introduction of a new token standard called ERC-6551. It takes Ethereum NFTs to a whole new level of usefulness and functionality.
Now, your favorite collectible can directly own assets, interact with web3 apps, and serve as your onchain identity more effectively. We are entering an exciting era, and in this post, we will provide you with a comprehensive overview of the fundamentals of ERC-6551. Let's dive in!
- Enhanced utility: ERC-6551 expands the range of applications for NFTs, allowing them to function as full-fledged Ethereum accounts.
- Direct asset ownership: Your NFT can now directly possess and manage assets, giving you greater control over your digital possessions.
- Web3 app interaction: With ERC-6551, NFTs can seamlessly interact with web3 applications, opening up new possibilities for engagement and functionality.
- Onchain identity: NFTs now have an improved capacity to serve as onchain identities, enhancing their role in decentralized ecosystems.
We are excited to explore the potential of ERC-6551 and its implications for the future of NFTs and Ethereum. Let's continue our journey into this fascinating topic!
ERC-6551, a recently launched token standard on the Ethereum mainnet (May 7th, 2023), offers a significant advancement in the capabilities of ERC-721 NFTs. By enabling NFTs to function as independent smart contract accounts, ERC-6551 enhances their versatility and functionality.
The motivation for the development of ERC-6551 stems from the increasing use of NFTs as onchain identities. Previously, ERC-721 tokens were unable to act as agents or possess other onchain assets, which limited their applicability in real-world scenarios involving non-fungible assets.
To address this limitation, ERC-6551 empowers each ERC-721 token with the complete functionalities of an Ethereum account while maintaining compatibility with existing ERC-721 contracts. This is achieved by deploying unique smart contract accounts known as "token bound accounts" for each ERC-721 token through a permissionless registry.
It's important to note that ERC-6551 allows a single NFT to own multiple token bound accounts, offering the ability to contain multiple wallets and more.
The ERC-6551 system consists of two primary components:
Permissionless Registry: This registry enables the deployment of token bound accounts. It provides a mechanism for creating and managing these accounts, enhancing the capabilities of ERC-721 tokens.
Standard Interface: ERC-6551 introduces a standardized interface for interacting with token bound accounts. This interface allows seamless communication with the accounts, enabling various functionalities and operations.
By combining these elements, ERC-6551 revolutionizes the potential applications and possibilities for ERC-721 NFTs, expanding their role as powerful assets in the Ethereum ecosystem.
The ERC-6551 standard unlocks a wide range of possibilities, enabling ERC-721 NFTs to perform the same functions as a regular Ethereum wallet. While the basics include storing other NFTs and trading ERC20 tokens, there's so much more to explore!
Let's delve into an example to illustrate the potential. Imagine you've been accumulating NFT wearables within a cutting-edge web3 game. Instead of holding these items in your conventional Ethereum wallet, you can now store them within an NFT of your choosing, such as your player avatar from the same game. This not only enhances the experience by making it more enjoyable and familiar on a psychological level, but it also opens up intriguing opportunities.
Consider this scenario: if you decide to move on from the game in the future, you can bundle your player avatar together with the accumulated wearables as a unified entity. Through the power of ERC-6551, you can list this cohesive unit on an NFT marketplace for potential sale. This allows you to offer a comprehensive package to interested buyers, maximizing the value and appeal of your NFT collection.
ERC-6551 empowers NFT holders to go beyond traditional functionalities, transforming NFTs into dynamic and versatile assets with endless possibilities.
The potential applications of ERC-6551 are vast and varied. Here's another example: projects that focus on Profile Picture (PFP) collectibles can leverage the expanded utility of their NFTs by rewarding holders with token bound accounts. They can airdrop incentives and rewards directly to the holders within their collection, further incentivizing engagement and loyalty.
Furthermore, the ability of ERC-6551 to support multiple token bound accounts and multi-chain token bound accounts introduces additional layers of utility. This opens up new avenues for experimentation and innovation within the NFT space, sparking fresh waves of creativity.
It's important to note a couple of caveats and safety implications related to ERC-6551:
Compatibility Limitations: Not all NFT projects are compatible with ERC-6551, particularly those whose smart contracts do not rely on an ownerOf method. For example, CryptoPunks is not supported by the standard.
Fraud Prevention: Decentralized marketplaces need to exercise caution to prevent potential scams. One example is a scenario where a user sells an NFT that supposedly contains a specific amount of ETH, only to withdraw the ETH after the sale, leaving the buyer with an empty account. Preventing fraudulent behavior requires vigilance and implementation at the marketplace level or through external smart contracts, as it is not directly addressed by ERC-6551.
Ownership Cycles: ERC-6551 introduces the possibility of an NFT being transferred to its own token bound account, rendering all assets within that account permanently inaccessible. This creates an "ownership cycle" that is challenging to prevent onchain due to the infinite search space required. While ERC-6551 does not enforce prevention of these cycles, it is recommended for applications to implement measures in their interfaces to limit such transfers.
Prominent figures in the blockchain space have shared their thoughts on ERC-6551:
Benny Giang, ERC-6551 co-author and co-founder of Future Primitive: “The idea is simple ... what if NFTs had their own wallets? Inspired by Soul Bound Tokens (SBTs) our idea is the inverse and we call it Token Bound Accounts (TBAs) Instead of an NFT bounded to a wallet, we have wallets bounded to NFTs.”
Gami, Nouns DAO member and founder of Gnars DAO and Tings DAO: “ERC6551 (Token Bound Accounts) is how I’ve thought about my Nouns ever since joining [Nouns DAO]. Hope to see us get behind it somehow … Makes the ‘entreprenouner’ concept entirely possible. Nouns could be sold along with what they’ve acquired and built during their journey.”
0xBeans.eth, Solidity engineer: “ERC-6551 is probably one of the more interesting application level Ethereum Improvement Proposals … A lot of interesting properties arise such as tradable accounts … ENS is one step towards onchain identities, full Ethereum accounts owned by NFTs is the next step in my opinion. This EIP goes hand in hand with EIP4337 (account abstraction). The reference implementation essentially create2s ETH accounts and bounds them to a token.”
These insights from key individuals in the community reflect the excitement and potential surrounding ERC-6551 and its implications for the future of NFTs.
Tokenbound is an open-source suite of tools centered around the ERC-6551 standard, and one of the services it provides is an account explorer interface that you can use to deploy ERC-6551 accounts and interact with others.
If you’re interested in deploying a token bound account to your NFT of choice, you would follow these steps:
Go to https: tokenbound.org and connect your wallet of choice
Click the “My NFTs” button
Select your desired NFT and press the “Deploy Account” button
Confirm the deployment transaction with your wallet, and wait for the transaction to complete
That’s it! You’ll now see a “Use Wallet” option in the dashboard of your selected NFT; at the time of writing I received a “Coming soon…” message, so look for full functionality to be rolled out in short order
Indeed, keep in mind that ERC-6551 just arrived on mainnet, so the tooling around it is just beginning to be developed. Expect to see all sorts of “user experience” and “user interface” advancements here going forward. In the meantime, I recommend taking some time to review the FAQ at the bottom of tokenbound.org before diving in.
The introduction of ERC-6551 marks a monumental milestone in the world of NFTs, ushering in a new era of possibilities. By transforming NFTs into their own smart contract accounts, ERC-6551 enhances the versatility and functionality of these unique digital assets. It not only expands the capabilities of NFTs but also aligns them more closely with real-world use cases, making them more practical and relatable for users.
Looking at the bigger picture, we can anticipate a surge in ERC-6551 adoption and an influx of innovative experiments in the coming months. The NFT ecosystem will witness the exploration of the full potential of ERC-6551, unlocking new dimensions of utility and creativity.
Furthermore, the advent of token bound accounts within NFTs addresses one of the common criticisms faced by NFTs—that they can be easily copied or saved by right-clicking. With token bound accounts, this argument becomes increasingly baseless. While it's true that you can copy and save a picture, you can't replicate or save the contents and functionality encapsulated within the NFT itself. This emphasizes the unique value and ownership associated with NFTs, reinforcing their position as truly unique and irreplaceable assets.
As ERC-6551 continues to shape the NFT landscape, we eagerly anticipate the dynamic developments and groundbreaking innovations that lie ahead.
credit: Metaversal
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