ERC-6551 is an emerging Ethereum standard for NFTs, allowing them to be more than just static assets while retaining the benefits and features of ERC-721. ERC-6551s use a permissionless registry that is compatible with existing ERC-721 NFTs to address this issue. In this article we are going to learn what the new ERC-6551 standard is, how it works and the different current use cases they offer us.
What is the ERC-6551 standard
ERC-6551 is an emerging Ethereum standard for NFTs, allowing them to be more than just static assets while retaining the benefits and features of ERC-721. The process follows the conversion of the asset into a token-linked account (TBA). Token-linked accounts provide NFTs with an interface and registry for ERC-721-based smart contract accounts. Based on ERC-4337, smart accounts can be customized and used to store assets and carry out transactions. In addition, token-linked accounts record all activities carried out on the blockchain in an unalterable way. Although token-linked accounts technically belong to an ERC-721 NFT, their control is delegated to the owner of the NFT. An owner can initiate on-chain actions on behalf of an NFT using an account linked to a token.
Operating diagram of the ERC-6551 standard. Source: Twitter.
How the ERC-6551 standard works
ERC-6551s use a permissionless registry that is compatible with existing ERC-721 NFTs to address this issue. The registry is a smart contract that acts as a factory and directory for TBAs. Anyone can create a TBA for any ERC-721 token by calling a registry function and paying a small fee. The registry then deploys a proxy contract that acts as a TBA for the token. The proxy contract representing the TBA inherits all properties and metadata from the original ERC-721 token. It also implements the EIP-1271 standard, which allows you to sign messages and verify signatures on behalf of the token. This allows the TBA to interact with other smart contracts and accounts on the Ethereum network, such as decentralized exchanges (DEX), lending platforms, gaming environments, and more.
Operation of the ERC-6551 standard. Source: eips.ethereum.org/EIPS/eip-6551
Use cases of the ERC-6551 standard
The new ERC-6551 standard has opened a range of possible use cases regarding NFTs, of which we can highlight the following:
Composability
Composability means you can group your NFT with its related assets, such as other NFTs and tokens, into one profile. If you sell or transfer the ERC-6551 NFT, all assets it contains will be transferred as well. For example, with TBAs, you can create “inventories” of game-related assets that can be stored in the ERC-6551 token and greatly improve the user experience of a Web3 game. Before TBAs, all assets (NFTs) collected in a game were held in separate tokens in the wallet.
Identity
Identity means that each of your NFTs has its own identity and can interact with DApps independently. They do not depend on the wallet that contains them and can be associated with your identity on the chain.
This opens up new possibilities for loyalty programs or in-game rewards based on an NFT's past behavior. This could also have an impact on the value of your NFT, as platforms could use the identity and reputation of your NFT to determine its creditworthiness or reduce counterparty risks.
Provenance
Provenance means that a full picture of the transaction history or utility of the asset can be obtained beyond proof of ownership. Currently, NFTs do not provide much information about what the NFT has done in the past or how it has been used. If you sold your NFT over the counter, you usually don't have much information about the buyer or the price. With TBAs, you can get more detailed and specific information about the NFT's past transactions and interactions.
Dependence
Dependency means that your NFT can interact on its own with other assets or platforms on the chain, increasing its functionality and value. An ERC-6551 NFT may possess other assets or tokens that may improve its performance or appearance. It can also interact with other platforms or smart contracts. This is similar to the NFT having its own personality and history on the chain, making the NFT more interactive.