Since July 2022, the NFT market has seen a notable decline, with the Blue Chip Index illustrating a drop from 12,394 ETH to 5,700 ETH, resulting in a 55% contraction. Despite this downturn, the NFT industry has not lost its capacity for innovation, as reflected in the creation of the ERC-6551 standard.
ERC-6551: A New Standard
The ERC-6551 standard, also known as Non-fungible Token Bound Accounts, was proposed by Jayden Windle, Benny Giang, and their team, Future Primitive. The team, notable for their work on Cryptokitties, envisages ERC-6551 as an interface and registry for smart contract accounts owned by ERC-721 tokens. The new standard aims to turn NFTs into dynamic assets, maintaining ERC-721 benefits while adding the ability to manage these assets through token-bound accounts.
How Does ERC-6551 Work?
The operational dynamics of ERC-6551 can be illustrated through a simplified explanation. Consider a scenario where a user's account holds two NFTs: NFT #123 associated with Contract A and NFT #456 associated with Contract B. According to the provisions of ERC-6551, each NFT can have multiple accounts, so let's assume that NFT #123 has two accounts (A and B), while NFT #456 has a single account (C). These accounts are all created by the registry.
A potential challenge arises here, however. If separate contract logic is created for each of these accounts, it would result in significant gas fee consumption. This is an inefficient solution, especially considering that most of the contract code would be identical, with only the parameters differing between accounts.
To circumvent this issue, the ERC-1167 Minimum Proxy Contract standard comes into play. This standard allows for the creation of a single 'master contract', designed to execute the common logic. The individual accounts then function as proxies, pointing towards this master contract, and only differing in terms of the specific parameters passed to the contract. This approach optimizes operational efficiency and economizes gas consumption, while allowing the benefits of ERC-6551 to be fully realized.
Market Overview
The ERC-6551 standard was officially deployed to Mainnet on May 7, 2023. As data by @sealaunch, since its implementation, the standard has experienced considerable uptake with over 2,000 accounts being created, and in excess of 650 transactions conducted, thereby demonstrating early adoption momentum.
There have been several waves of increasing activity, the most notable of which occurred on July 4th. This date marked a significant uptick in the adoption of the ERC-6551 standard with an impressive addition of 709 new accounts - an unprecedented daily increase.
Prominently, the collection Sapienz and Managers were instrumental in driving this surge, collectively accounting for approximately 30% of all collections. Their efforts have undoubtedly set a positive precedent for future adoption of the ERC-6551 standard.
ERC-6551 Use Cases
• Creation of a Unified Inventory System: ERC-6551 allows for a consolidated profile for an ERC-721 token and its affiliated assets. This feature facilitates the construction of a holistic inventory system, enhancing organization and accessibility. It empowers users to easily track, manage, and interact with their digital assets in a more integrated manner.
• Communication Enhancement through Profile Picture Transmissions: The ERC-6551 standard establishes an infrastructure for transmitting messages via PFPs and their associated accounts over Ethernet. It generates unique wallet addresses associated with PFPs and allows users to send messages associated with their PFPs that can then be received by other network participants.
• Tokenization of Music for Unique Identification: The ERC-721 and ERC-6551 standards offer potential applications for the music industry. ERC-721 tokens can be used to represent unique artists, while ERC-6551 accounts are associated with their songs or albums. Through the use of unique identifiers (token IDs), artists and their songs can be further identified.ERC-6551 accounts provide an efficient way to manage and monetize songs, including sales and licensing options.
• Risk Mitigation in Credit Scenarios: In credit systems, ERC-6551 can serve as a tool for risk mitigation. Using the ERC-6551 standard, you can deposit additional funds into your NFT assets to reduce the risk of liquidation in the event of credit risk. As a result, ERC-6551 protects assets and reduces risk. This would offer greater transparency and accountability, making the credit evaluation process more precise and efficient.
• Enhanced In-game Item Interaction: For gaming applications, ERC-6551 can allow for the creation of game item accounts. These accounts can control item attributes, such as damage levels and magic attributes, and can also handle ingame currency transactions, providing enhanced interaction and management for item owners. This approach can increase the scope for interaction between players and items, and enhance the overall gaming experience.
• Tiered Membership Systems: ERC-6551 can facilitate the creation of tiered membership systems in which each membership level is associated with a specified Token Bounded Account . Members can be rewarded with exclusive access to services or products based on the traceable history of their NFT or the assets their NFT hold, fostering customer engagement and loyalty.
The Impact of ERC-6551
• Revolutionizing Asset Management: The introduction of the ERC-6551 standard marks a major stride in the advancement of NFTs and their associated assets. By bringing about enhanced capabilities for inventory management and control, this standard could potentially revolutionize the way we manage and interact with digital assets. Its ability to provide a unified, comprehensive, and interactable profile for each ERC-721 token and its associated assets paves the way for more organized, accessible, and effective asset management systems.
• Strengthening Security via Access Control: ERC-6551 significantly bolsters security in the realm of digital assets. This is achieved by the implementation of access control mechanisms, where the creation, transfer, and utilization of tokens are dictated by defined access permissions. This heightened security protocol minimizes unauthorized access and enhances the overall security of the asset management systems.
• Comprehensive History of Transactions, Ownership, and Utility: Another noteworthy feature of ERC-6551 is its ability to maintain a complete history of transactions, ownership changes, and the utility of assets. This provides a level of transparency that is invaluable in establishing trust in the system, resolving disputes, and allowing for thorough auditing. It ensures accountability and helps in tracking asset performance over time.
• Facilitation of Multiple On-chain Identities via NFTs: Perhaps the most groundbreaking impact of ERC-6551 is the possibility of creating multiple on-chain identities using NFTs. This enables a single NFT holder to manage multiple unique identities, each with its own set of properties and access controls. It expands the use cases of NFTs from mere ownership proof to the creation and management of complex digital identities, opening up a plethora of opportunities for novel applications in gaming, social networks, and decentralized finance (DeFi) among other sectors.
Projects
1. AquaNet: (created at ETHGLOBAL WATERBOO)
AquaNet is a decentralized, AI-driven social media platform that leverages the ERC6551 standard to create a user-friendly and engaging environment. With ERC-6551, each user profile, represented as an NFT, has associated assets like posts, comments, and followers. This ensures secure interactions and data ownership, making the platform more secure and interactive.
2. Fukuro: (created at ETHGLOBAL WATERBOO)
Fukuro is an online auction marketplace using the ERC-6551 standard to create unique identities for each listed item. Every item is tied to an NFT, and all associated information (like bidding history, item details, and previous owners) is stored on-chain. This provides transparency and trust in the bidding and auction process.
3. Piggybank6551: (created at ETHGLOBAL WATERBOO)
Piggybank6551 has used the ERC-6551 standard to create a unique decentralized saving account system. In this system, each NFT acts as a savings account, with associated assets being the amount saved, the interest rate, and the time until maturity. This creates a transparent, secure, and easy-to-use savings system.
4. Tokenbound Titans: (created at ETHGLOBAL WATERBOO)
This project is a gaming platform where each player's avatar, in-game items, and accomplishments are represented by NFTs based on the ERC-6551 standard. This enhances the gaming experience by providing a detailed and transparent record of each player's game progress and ownership of game assets.
5. Sapienz
Sapienz, a comprehensive platform that engages with street culture, leverages the ERC-6551 standard in its operations. According to data from Nftgo, Sapienz experienced unprecedented trading volumes on the 4th and 5th of July. A record high of 77.59 ETH was traded on the 4th, followed by a significant volume of 40.73 ETH on the 5th.
The platform's floor price exhibited a remarkable rise, increasing by 321% from 0.0285 to 0.12 ETH. This sharp ascent was later followed by a stabilization at a rate of 0.072 ETH on the 6th of July.
During this period, market activity was particularly robust, with 460 recorded sales contributing to a liquidity rate of 7.36%. Additionally, the number of active buyers and sellers also showed an upward trend, growing to 198 and 236 respectively. These metrics suggest a positive and dynamic market performance during this timeframe.
Challenges of ERC-6551
While the ERC-6551 standard holds significant promise, it does introduce complexity requiring a high level of user understanding. Not all NFT projects are suitable for the ERC-6551 standard, especially those that utilize the ownerOf method. Furthermore, the increased functionality of NFTs through ERC-6551 could make them more appealing to hackers, necessitating robust testing to ensure stability and security.
Conclusion
Despite the bearish NFT market, innovative developments like the ERC-6551 standard offer potential growth avenues for the NFT industry. This new standard allows NFTs to act as agents and be associated with other on-chain assets, enabling dynamic asset management and offering significant benefits and potential use-cases. While the adoption of ERC-6551 does involve certain challenges and risks, it could be a step towards a more versatile and functional future for NFTs.