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- 1 ERC-6551 is a new token standard for NFT. With this, NFTs will develop more utility than just being PFPs.
- 2 It will increase the functionality and value of NFT by adding smart contract capabilities.
ERC-6551 acts like a smart contract wallet. It means it can hold and transfer other NFTs. They are token-bound accounts (TBA) created and managed through a permissionless registry that is compatible with ERC-721 NFTs. It is co-authored by Benny Giang. He is a founding member of Dapper Labs and has previously worked on the ERC-721 token.
Working of ERC-6551 and How it Improves the NFTs
ERC-6551 is an advanced version that solves the incapabilities of ERC-721. ERC-721 is not capable of iterating with other smart contracts. Neither can change and develop with time. These limitations are ruled out by ERC-6551. It uses the permissionless registry and is compatible with ERC-721.
This registry is a smart contract that acts as a factory and directory for TBA. Since this is compatible with ERC-721, anyone can build TBA for any ERC-721 in exchange for a small fee.
With ERC-6551, it is possible to create multi-on-chain identities which will increase the chances of interaction with the smart contracts and dApps. This will increase the chances for in-game rewards and loyalty program rewards. The ownership, transaction, and history related to it are accessible.
When someone buys NFTs, the previous owners, prices, and history of that NFT remain unknown but with ERC-6551, it becomes available due to smart contracts. Thus, there is a huge increase in transparency.
Increase in the Utility of NFTs with ERC-6551
NFTs have limited use according to their categories but this token has increased its utility by providing smart contract compliance with ERC-721 which can store data.
Gatherable
ERC-6551 is gatherable. It can gather NFT with other assets, NFTs, and tokens. If ERC-6551 is sold, then all the embedded information and assets will be transferred. Before this, all the NFTs earned in the game are stored in a separate token in a wallet. Currently, with TBAs, all assets collected with the game are stored in a single place to give a wonderful experience of the Web3 game.
Identity
It has its own identity and does not depend on wallets for interaction. In a way, it increases the new possibility for in-game rewards.
Dependency
Dependency means NFT can interact by itself with other on-chain assets or platforms which enhances its functionality and value. It can own other NFTs that can increase its value. It can interact with other smart contracts increasing its functionality.
ERC-6551 Facing Challenges
When something new comes into the field, then it has to face some challenges like gaining immense favoritism from projects and platforms. All NFT projects do not support the ERC-6551 standard. They may lack compatibility.
Due to technical difficulties and business reasons, every project is not able to interact with this token. The other challenges include security concerns. Since it provides a wider space for hackers. It should also be user-friendly and should give an intuitive experience. The process of creating, managing, and accessing should be easier.
Summary
ERC-6551 can change the world of NFTs by erasing the need for wallets. It allows the creation of chain identities through NFTs which are used to interact with smart contracts and dApps. Hence, it is concluded that it gives ERC-721 a smart contract that stores information and other assets as well. This makes NFT more versatile and interactive.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
