Token standards determine how the creation, functioning, and transfer of cryptocurrency tokens occurs. Different token standards have been introduced to ensure the standardization of cryptocurrency tokens with blockchain. This article explores the key differences in popular token standards: ERC 721 and ERC 1155.
Understanding the Non-Fungible Token Standards
Token standards are a set of rules and protocols that describe the way in which the creation, functioning, and transfer of crypto tokens takes place on a blockchain ecosystem. Token standards help the tokens integrate with the blockchain network seamlessly. The rules included in the standards are proposed by developers and community members of the blockchain.
ERC 721 and ERC 1155: The Two Popular NFT Standards
Ethereum is the most preferred blockchain network by decentralized app developers. ERC 721 AND ERC 1155 runs on the Ethereum blockchain. However, Ethereum is not only the blockchain that offers token standards, BNB and Solana also provide token standards.
What is ERC 721?
ERC 721 is one of the most complex yet popular token standards of the Ethereum network. It offers multiple extensions and frameworks for the creating, owning, and transferring of non-fungible tokens (NFTs). Introduced in 2017, the standard provides a smooth interface for NFTs and allows their transfer, making them tradable against other currencies. One key feature of ERC 721 is that it evaluates the total number of NFTs available on a blockchain network. NFTs utilizing ERC 721 are mainly artworks, music, and blockchain games.
The key features of ERC 721
- ERC 721 tokens are unique, each token has distinct values.
- The transferring of tokens takes place one by one.
- It has unique metadata which is stored off-chain.
- The tokens are irreplaceable.
Application of ERC 721
ERC 721 are unique assets and they offer various use cases.
1. Digital art
ERC 721 are tokens with unique meta codes, values, and properties, making them most suitable for tokenizing digital art. The digital art gets stored as an NFT with its own value and ownership.
2. Rare and popular products
Rare and popular products can be tokenized as ERC 721. By storing them as NFT their value and authenticity remain unchanged and unique.
3. Properties
Real estate properties can be bought, sold, and shared as ERC 721 tokens. Since they are unique, the property can be represented as it is, creating transparency. It stores the transaction history, preventing confusion and providing ownership details for buyers.
Limitations of ERC 721
- Each unique asset requires smart contracts. The development of smart contracts is complex, and ensuring unique codes for each NFT can be challenging.
- Seamless integration with other token standards requires careful implementation and testing, which can be a complex process.
- Smart contracts utilized in ERC 721 are vulnerable to numerous exploitations, including bugs, hacks, and scams.
- During high trading volumes, network congestion takes place reducing the speed of transactions. It also increases the gas fee required for transactions.
What is ERC 1155?
ERC 1155 is a token standard launched in 2018 that aims to mitigate the challenges of its previous standards by creating tokens that are either fungible or non-fungible. It is an extended version of ERC 721, as it combines the advantages of both ERC 721 and ERC 20 with some additional complicating factors.
The standard enables a single smart contract to transfer a large number of tokens, reducing network congestion and transaction costs, which were the two major limitations of ERC 721.
The Key Features of ERC 1155
- ERC 1155 supports different types of assets such as fungible, semi-fungible, and non-fungible tokens.
- It transfers a large number of tokens using a single smart contract, providing efficiency in transactions.
- The scalability feature of ERC 1155, increases the speed of transaction and reduces the gas fee.
Applications of ERC 1155
1. Gaming
ERC 1155 manages multiple tokens in a single smart contract making them effective for gaming activities. Games require in-game currency and devices, which can be accommodated in ERC 1155 as it supports both fungible and non-fungible tokens.
2. NFT marketplaces
Platforms that host rare assets can utilize the benefits of ERC 1155 tokens. It provides flexibility to manage a large number of tokens using a single smart contract.
3. Loyalty programs
ERC 1155 can be utilized in blockchain-based rewards. Users can exchange these rewards for different types of assets including fungible, and non-fungible.
Limitations of ERC 1155
- Smart contracts utilized by ERC 1155 are prone to vulnerability risks, including hacks and scams.
- Managing ERC 1155 tokens can be cumbersome for some users as it involves different types of asset management.
ERC 721 v/s ERC 1155: A Comparison
| Features | ERC 721 | ERC 1155 |
| Token support | Supports only non-fungible tokens | Supports fungible, semi-fungible, and non-fungible tokens. |
| Token individuality | Tokens can’t shared or exchanged one to one. | Tokens can be exchanged one to one. |
| Token transfer | One by one transfer, each transfer requires a smart contract. | Batch transfer using a single smart contracts |
| Speed of transaction | Low speed | High speed |
| Gas fee | High gas fee | Low gas fee |
Which Token is Best for the NFT Marketplace?
ERC 721 and ERC 1155 are an integral part of Ethereum’s blockchain. However, ERC 721 is utilized for specific purposes while ERC 1155 offers flexibility, efficiency, and scalability; hence, it overcomes the challenges of ERC 721. The expanded functionalities provided by ERC 1155 allow the production, storage, and exchange of digital assets, making it best for the NFT marketplace.