This article will discuss the ERC Standards, which are important for understanding tokens issued on Ethereum, and will not only clarify the differences between ERC-721 and ERC-1155, which are used to issue NFTs, but also consider the use cases for the newly created ERC-4907. After reading this text, you should be able to determine which ERC standard is best suited for issuing NFTs.
What is the ERC standard (Ethereum Request for Comments)?
ERC (Ethereum Request for Comments) is a smart contract standard that was standardized through discussions on proposals to enhance the convenience of the Ethereum development community, called EIP (Ethereum Improvement Proposals).
The most famous ERC standard is ERC-20, which was created on November 19, 2015; ERC-20 standardizes the core functionality of each token, and all tokens created according to this standard are compatible with ERC-20 compatible CEX, DEX, wallets, etc. Incidentally, the numbers following the ERC indicate the order in which they were proposed on Github.
Prior to the creation of ERC-20, tokens had different specifications and each service had to deal with them individually; with the creation of ERC-20, each service no longer needs to deal with additional services, making it possible to handle new tokens more efficiently.
Differences between ERC-721 and ERC-1155
Currently, the most commonly used ERC standard for issuing Non-Fungible Tokens (NFT) is ERC-721, while ERC-20 only allows the issuance of mutually substitutable (Fungible) tokens. ERC-721, on the other hand, allows the issuance of tokens that are not mutually substitutable (Non-Fungible) by setting a unique token ID. This makes it possible to digitally express the unique value of irreplaceable assets, such as artwork or in-game items, by making them NFTs.
See also: The Possibility of NFTs
ERC-1155 is another ERC standard that is often seen when issuing NFTs; ERC-1155 allows for the issuance of both substitutable tokens with ERC-20 features and irreplaceable tokens with ERC-721 features in a single smart contract. In addition, ERC-1155 allows tokens to be sent to multiple addresses at once, saving gas and increasing convenience.
With the creation of ERC-1155, one can think of more fluid and creative use cases for NFTs. For example, consider the case where you want to transfer characters and their holdings of items together in a blockchain game. Until now, each of those items would have to be sent separately, which was not only expensive in gas but also complicated in procedure. With the ERC-1155, however, you can transfer the character and its possessed items together.
Thus, ERC-1155 is more scalable than ERC-20 and ERC-721, but it also has its challenges. That is, it is not compatible with ERC-721, which is currently the mainstream NFT standard. As a result, many blockchain games already in operation are not compatible with ERC-1155 and continue to use ERC-721.
Possibilities and Use Cases for ERC-4907
So far, we have discussed ERC-721 and ERC-1155 as NFT standards. Recently, however, a new standard, ERC-4907, which allows NFTs to have a rental function, has been introduced, adding the addressable role "user" to ERC-721 and the time "expires" to automatically disable the role. In short, the "user" gives the NFT permission to use and a time limit, and the "expires" automatically revokes the user, thereby enabling NFT rentals.
One possible use of ERC-4907 is to allow NFT owners in blockchain games to rent their characters and items to other users for a certain period of time and have them return them automatically. There may also be demand for the ability to temporarily rent NFT art owned by the owner to NFT galleries or other collectors. In this way, it can be said that the ERC standard has the potential to spread as a new NFT use case.
Using Different ERC Standards for Different Purposes
This article starts with an explanation of ERC standards and then describes the features and differences between ERC-721, ERC-1155, and ERC-4907. As mentioned in the main text, when issuing an NFT, it is necessary to consider not only the functionality but also the prevalence of each ERC standard. In other words, it is recommended to use different ERC standards according to the purpose of issuing NFTs, not according to which standard is superior.