Let’s discuss some of the science behind NFTs, commonly called blockchain technology. Blockchains are networks of nodes (servers/computers) that store information and transactions and rely on one another for accuracy. Non-fixtures are no different, as there are a variety of things that distinguish them from the rest.
Standards for smart contracts and tokens
An automated smart contract is a program that automatically executes a transaction according to the terms agreed on by the buyer and seller. Besides adhering to standards, smart contracts also must conform to the rules of the blockchain on which they will interact/be used. Token standards are one of those smart contract standards, and they guide the creation, issuance, and deployment of new tokens on the blockchain.
How do ERC-721 works?
Did you know you’ve already seen, heard, bought, and owned an ERC-721 digital asset? Non-fungible tokens, or ERC-20 tokens, are the most familiar and widely used token standard for the Ethereum blockchain, popularly known as Ethereum Request for Comment (ERC-20).
A lot of NFTs, including Bored Ape Yacht Club, Cool Cats, and Invisible Friends, still use the same token standard.
Since each ERC-721 token has its unique characteristics, it is believed that its usage is far beyond its current use as a digital asset ownership token and can also be used for representing the ownership of property, vehicles, businesses, and other assets. To gain acceptance among the majority population and corporations, NFTs, blockchain technology, and cryptocurrencies must be used legally and morally.
Different token standards
ERC-1155 is the most advanced token standard and is designed to enhance transaction efficiency and security, as well as bundle transactions and reduce transaction costs. Using semi-fungible and non-fungible tokens assists in the integration of ERC-20 and ERC-721. You can use it to create TGE/ICO coins as well as non-fungible tokens, batch token transfers, and more.
Most cryptocurrencies use this by far and it is the most popular. There is no difference between them and they can be exchanged easily. There is no limit to its versatility. You can use it to buy items, trade it for fiat and other coins/tokens, and even get in-game assets. Token generation events (TGE) and initial coin offerings (ICO) are the most common uses.
By allowing tokens to be rejected on specific terms (i.e., less or greater than), ERC-777 enables users to react to transactions. The ‘Hooks’ feature is ideal for fungible tokens that are fully compatible with decentralized exchanges, allowing smart contracts to “receive and reject” large amounts of tokens simultaneously. In case of a lost private key, emergency recovery is available. The token has been upgraded to ERC-820 due to its issues.
To sum up
Understanding what token standards are and what they can do can help you better understand the idea and appreciate NFTs. This information will enable you to determine the value of an NFT you are interested in buying or selling based on another factor. NFTs can vary in value depending on their utility, which is limited to the standard they use. Keeping learning might lead you to create the next revolutionary token standard!