What is ERC-6551?
ERC-998 is an Ethereum standard that aims to enhance the functionality of non-fungible tokens (NFTs) by allowing them to operate as their own smart contract accounts.
This standard seeks to open up a variety of use cases across NFTs, gaming, DAOs, and the metaverse, aiming to make NFTs more dynamic and interactive.
Despite its potential, ERC-998 has limitations, including high gas fees and limited compatibility with existing systems.
Understanding ERC-998
ERC-998, known as the token-bound account standard, is an addition to the Ethereum blockchain. It was created to address a limitation of ERC-721 tokens, which couldn't act as owners of other on-chain assets or perform actions like an Ethereum account. This standard allows NFTs to operate as their own smart contract accounts, thereby aiming to expand their functionality and value.
For instance, if a profile picture (PFP) NFT collection implements an ERC-998 token standard, the NFT could custody its own native cryptocurrency or other derivative NFTs. This has earned ERC-998 the nickname “backpack” wallet.
The Benefits of ERC-998
The introduction of ERC-998 has brought about several benefits. It has aimed to improve the capabilities of NFTs. Token-bound accounts (TBAs) can engage with other smart contracts and decentralized applications (dApps), opening up endless possibilities for NFTs.
ERC-998 aims to enhance interoperability. TBAs are compatible with other Ethereum standards, which makes it easier for NFTs to be used across different platforms.
ERC-998 aims to enhance user-friendliness. It makes it easier for users to manage their NFTs and can be accessed from any web3 wallet.
The Limitations of ERC-998
Despite its potential, ERC-998 has limitations. High gas fees associated with ERC-998 can increase, especially during periods of network congestion. This can make it expensive to use ERC-998 NFTs.
While this new token standard is exciting, it's essential to note that not all platforms or systems are compatible with it. This could limit the use and adoption of ERC-998.
ERC-998 in Action
Several Web3 projects have already adopted the ERC-998 standard. For example, a decentralized social media platform announced its latest update, which allows ERC-998 enabled tokens to custody their own profiles on the site.
Fashion designer Jeff Staple’s Web3 studio implemented ERC-998s into its NFT collection, allowing holders to own external NFTs through their token-bound accounts.
As of now, there are nearly 3,775 ERC-998 based accounts created, indicating a growing interest and adoption of this new standard.
The Future of ERC-998
The future of ERC-998 aims to unlock powerful new features for blockchain-based digital assets. It aims to play a role in the evolution of NFTs, aiming to enhance their functionality beyond static images.
With the ability to interact with other smart contracts and dApps, NFTs can become more dynamic and interactive, potentially enabling new use cases in the metaverse, gaming, and DAOs. However, the utility of ERC-998 may depend on its adoption by developers and its compatibility with existing systems.
