The recent introduction of the ERC-6551 standard on the Ethereum mainnet has garnered significant attention. As the NFT hype subsides, the market is eagerly anticipating the realization of once-exciting use cases. With the emergence of the ERC-6551 protocol, a potential shift in the market's direction is on the horizon.
This article delves into the details of ERC-6551, exploring its innovations, technical advantages, application examples, and potential risks.
ERC-6551, launched by the Future Primitive team on May 23, 2023, introduces the concept of Token Bound Accounts (TBA) to the token standard. This concept allows NFTs to serve as on-chain accounts, giving life to the notion of ”NFTs as wallets“.
This could open up new possibilities for ERC-721 NFTs, as current NFTs merely function as static assets stored in wallets, lacking interaction with other DApps and the ability to represent true on-chain identities. Currently, users' on-chain identities remain tied to wallet addresses.
ERC-6551, through a plug-in mechanism, enables the creation of smart contract wallets for existing ERC-721 NFTs. These TBAs possess full Ethereum account capabilities, allowing bound ERC-721 NFTs with composability, ownership of NFT and token assets, and interaction with corresponding DApps. Most importantly, all of these are forward-compatible, allowing permissionless deployment of smart contract accounts to each ERC-721 NFT. This transformation empowers NFTs to become genuine representations of on-chain identity.
This upgrade brings several technological advantages, including composability, independent identity, provenance, and dependency. These advancements enable NFTs to be bundled together with other NFTs and tokens, interact with DApps, and participate in incentive programs based on past behaviors.
Composability refers to the ability to bundle NFTs with related assets like other NFTs and tokens. This means that when you sell or transfer an ERC-6551 NFT, each asset within it is also transferred.
For instance, you can construct a game-related inventory stored within an ERC-6551 token. This can greatly enhance the user experience of Web3 games. Assets collected in the game (NFTs) remain as individual tokens within your wallet and are still tradable separately.
Each NFT possesses its own identity and can independently interact with DApps. It is not tied to the wallet holding it and can be associated with your on-chain identity. This opens up new possibilities for scoring mechanisms or game rewards based on NFTs' past behaviors, influencing the value and uniqueness of your NFTs based on their identity and reputation.
Provenance means gaining comprehensive transaction history or utility information about an asset beyond mere ownership proof. Presently, NFTs lack detailed information about their past actions or usage. With ERC-6551, you can access user history regarding past transactions and interactions with NFTs, which can be valuable for assessing an NFT's history.