Despite being a transformative technology, Web3 has not enjoyed continuous exponential growth and adoption as expected. One of the reasons for this is the complexity of owning and handling cryptocurrency wallets. Signing up for a crypto wallet and securing one’s seed phrase can be intimidating and overwhelming for beginners. To address this, crypto platforms have been working on simplifying the process and offering a better experience for newcomers. However, some teams are taking a different approach by focusing on the infrastructure that supports wallets, in the hopes of making things easier and breaking the adoption barrier.
One such approach has led to the development of the ERC-6551 token standard. This standard allows non-fungible tokens (NFTs) to function as wallets that can hold other assets. The concept was introduced in February as an Ethereum Improvement Proposal (EIP) by developers from Future Primitive and Manifold, an NFT creator platform. The ERC-6551 standard enhances the functionality of NFTs by giving them smart contract capabilities, enabling them to function as smart contract wallets. This means that an NFT can own assets and interact with applications without requiring changes to existing smart contracts or infrastructure.
The motivation behind creating the ERC-6551 standard was the limitations of the ERC-721 token standard, which is used for creating unique digital assets on the Ethereum blockchain. NFTs created using the ERC-721 standard cannot act as agents or associate with other on-chain assets, making it difficult to represent many real-world non-fungible assets as NFTs. The ERC-6551 standard solves this problem by allowing NFTs to own other NFTs and assets, execute arbitrary operations, control multiple independent accounts, and use accounts across multiple chains.
The use cases for the ERC-6551 token standard are wide-ranging. One of the first applications was in digital fashion, where NFTs can own and trade clothing items. This enables collaboration between multiple artists, who can contribute separate NFTs to an on-chain clothing item, creating an entirely new piece that acknowledges each artist as a contributor. In the gaming industry, ERC-6551 allows gaming characters to collect and trade assets and crypto throughout the game, enhancing the gaming experience. Wallet-bound NFTs can also be used in Decentralized Autonomous Organizations (DAOs) to represent the identity of their owners, enabling them to perform roles such as voting, signing contracts, and accessing services securely and transparently.
Although the ERC-6551 token standard is still a proposal and has not yet become a legitimate standard, it has gained traction within the crypto community. As of September 2023, there were over 17,200 ERC-6551 wallets, mainly on the Polygon blockchain. The token-bound wallets are Ethereum Virtual Machine (EVM) compatible, allowing them to be operable on networks like Polygon, Arbitrum, and Optimism.
Projects like Stapleverse and Lens have already adopted the ERC-6551 standard. Stapleverse’s Sapienz project uses token-bound accounts to unlock customizable characters based on other owned NFTs, adding value to the character’s inventory. Lens, a decentralized social media platform, allows tokens to custody their own profiles on the platform.
However, the ERC-6551 standard also presents challenges. Selling assets can become more complicated due to the recursive nature of its implementation. For example, a shoe that owns a shoelace that owns a charm, all in the form of NFTs, makes it challenging to sell the charm alone. Additionally, the implementation of ERC-6551 requires higher gas fees, increasing the cost of selling or trading assets compared to individual NFTs.
In conclusion, the implementation of the ERC-6551 token standard has the potential to increase the adoption of NFTs and introduce more functionality and interoperability into the Web3 space. It has applications in digital fashion, gaming, DAOs, and other blockchain applications. While there are challenges to overcome, the ERC-6551 standard is set to redefine digital ownership and pave the way for a more user-friendly Web3 experience.
