ERC-6551: The new Ethereum standard unlocking fresh possibilities for NFTs
What is ERC-6551?
ERC-6551 Token Bound Accounts (TBA) is a new and innovative Ethereum standard that expands the functionality of NFTs by allowing them to operate as their own smart contract accounts. This exciting development, created by the Future Primitive team with contributions from Manifold and the token-bound developer community, brings newfound versatility and utility to NFTs, transforming them into powerful digital assets.
In 1992 JPEGs allowed us to view and transmit images to each other; in 2017, NFTs let us buy, sell and trade, but what's next for 2023? The answer could be ERC-6551, which will provide seamless interactions and functionality.
ERC-6551 was created to address a limitation on ERC-721 tokens. Before, ERC-721 tokens couldn't act as owners of other on-chain assets or perform actions like an Ethereum account. This limited their usefulness in the real world.
To overcome this, ERC-6551 introduces token-bound accounts (TBA) — unique smart contract accounts associated with each ERC-721 token. These accounts are created through a permissionless registry and come with all the capabilities of an Ethereum account, allowing for more practical and user-friendly interactions.
The benefits of ERC-6551
While the token standard is still new, since its release on May 7, 2023, it has offered a much-needed rewrite to NFTs, making them more dynamic and interactive.
- Improved capabilities: TBA can be used to engage with other smart contracts and dApps, opening up near endless possibilities for NFTs.
- Greater interoperability: TBA is compatible with other Ethereum standards, which makes it easier for NFTs to be used across different platforms.
- Enhanced user friendliness: The key to mass adoption is to keep both crypto natives and the crypto curious in mind. TBA makes it easier for users to manage their NFTs and can be accessed from any web3 wallet.
The limitations of ERC-6551
While getting caught up in the excitement of a new token standard is normal, doing your own research to get the full picture is also essential. With that in mind, there are some limitations with ERC-6551.
- High gas fees: The gas fees associated with ERC-6551 can increase, especially during periods of network congestion. This can make it expensive to use ERC-6551 NFTs.
- Limited compatibility: While this new token standard is exciting, it's essential to know not all wallets and platforms support ERC-6551.
- Lack of awareness: ERC-6551 is a new standard and is not yet widely known. Only some users know of it and how to use it. What's next for ERC-6551
ERC-6551 unlocks new possibilities for NFTs, going beyond their conventional uses. For example, NFTs can now become repositories for in-game wearables and digital items, enhancing user immersion and familiarity. Additionally, PFP (Profile-for-Proof) projects can incentivize collectors by rewarding token bound account holders. Finally, having multiple token bound accounts and support for multiple chains further enhances the utility and stimulates innovation in the NFT ecosystem.
Disclaimer: THIS ARTICLE IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. IT IS NOT INTENDED TO PROVIDE ANY INVESTMENT, TAX, OR LEGAL ADVICE, NOR SHOULD IT BE CONSIDERED AN OFFER TO PURCHASE OR SELL OR HOLD DIGITAL ASSETS. DIGITAL ASSET HOLDINGS, INCLUDING STABLECOINS, INVOLVE A HIGH DEGREE OF RISK, CAN FLUCTUATE GREATLY, AND CAN EVEN BECOME WORTHLESS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING OR HOLDING DIGITAL ASSETS IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PLEASE CONSULT YOUR LEGAL/TAX/INVESTMENT PROFESSIONAL FOR QUESTIONS ABOUT YOUR SPECIFIC CIRCUMSTANCES.
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