Written by: NFTScan
With the rapid development of digital assets and blockchain technology, non-fungible tokens (NFTs) have become an important form of asset, widely used in art, games, collectibles and other fields. With the diversification of market demand, traditional NFT standards such as ERC-721 and ERC-1155 can no longer fully meet the needs of users, especially in terms of flexibility and interactivity. In order to meet these challenges, a variety of innovative protocol standards have flooded into the market. This article mainly explores ERC-7401 because of its introduction of the concept of nested NFT, which opens up new possibilities for the functionality and flexibility of NFT.
What is ERC-7401?
ERC-7401, parent-managed nestable non-fungible tokens, was originally named ERC-6059, but was later revised and given a new number after many community comments. The standard was proposed in 2022 and finalized in September 2023. Its future application remains to be seen, but it will bring improved functionality. Its core innovation is to allow one NFT (parent NFT) to contain one or more other NFTs (child NFTs), thus opening the door to managing and interacting with multi-level assets.
This standard extends the basic NFT standard to allow nesting and parent-child relationships between NFTs. In simpler terms, NFTs can own and manage other NFTs, creating a hierarchy of tokens. This structure allows users to manage and trade their digital assets more flexibly, while also providing more possibilities for the creation and use of NFTs. Compared with other standards, ERC-7401 is designed with a greater focus on scalability and interactivity, and is intended to meet more complex application needs.
Concept and Innovation of ERC-7401
We are used to the fact that only user wallets or smart contracts can own NFTs, but it is also possible to "nest" non-fungible things in each other. The technical implementation of the ERC-7401 standard is based on the following core points:
Multi-level nesting: Supports unlimited levels of NFT nesting. Each parent NFT can contain multiple child NFTs, and these child NFTs themselves can also become the parent NFTs of other NFTs. This multi-level structure not only provides great flexibility for the combination and splitting of assets, but also allows the implementation of more complex asset relationships and management strategies.
Asset management flexibility: Users who own the parent NFT can freely manage the child NFTs within it, including but not limited to adding, removing, or replacing. This is particularly important when managing complex asset collections, such as art collections or multiple equipment in a game.
Interoperability across collections: Parent NFTs and child NFTs can belong to different NFT collections, which provides great flexibility for cross-brand or cross-platform collaborations. For example, an NFT for a movie series can contain limited edition artwork NFTs from multiple different artists.
Diversification of application scenarios
The actual application scenarios of ERC-7401 are extensive and diverse, including but not limited to the following aspects:
Game industry: Game developers can use ERC-7401 to design more complex in-game economic systems. For example, a character NFT (parent NFT) can contain multiple equipment NFTs (child NFTs), which can be updated or traded separately, thereby increasing the strategy of the game and the player's sense of participation. Not only does it make asset management more centralized, but the character's abilities and appearance can also be adjusted by trading child NFTs.
Art and Collections: Artists can provide a holistic or decentralized collection method by creating a collection NFT (parent NFT) containing multiple works. This not only makes it easier for artists to manage and sell their works, but also provides collectors with more choices and flexibility.
Community management: The ERC-7401 standard also has important applications in community management. Through ERC-7401, communities can create parent community NFTs that contain multiple sub-communities or activities. For example, a large community can be used as a parent NFT, and different activities, conferences, and sub-communities within it can be used as sub-NFTs. In this way, community managers can more conveniently manage and organize community activities and enhance community participation and cohesion.
Identity and Certificates: In terms of digital identity authentication, an individual or organization can issue a parent NFT that contains multiple authentication or qualification certificates. Each certificate is stored as a child NFT, making it easier to manage and verify an individual's multiple identities or qualifications.
The impact of ERC-7401 on the NFT ecosystem
1. Improve the value and liquidity of NFT
By introducing a nested structure, the ERC-7401 standard can improve the overall value and liquidity of NFTs. The value of a parent NFT containing multiple child NFTs is often higher than the sum of the individual NFTs. In addition, the unified management and trading of nested NFTs can greatly improve the liquidity of NFTs and promote the activity of the market.
2. Stimulate innovation
The ERC-7401 standard provides developers and creators with more room for innovation. Through nested structures, developers can design more complex and rich digital assets, inspiring more creativity and applications. For example, in games, developers can design game assets with multiple levels and complex relationships, thereby enhancing the depth and fun of the game.
3. Optimize user experience
The introduction of the ERC-7401 standard can greatly optimize the user experience. Through unified management and trading of nested NFTs, users can manage and trade their digital assets more conveniently. In addition, the nested structure can more intuitively display the hierarchy and relationship of digital assets, improving the user's understanding and operation experience.
4. Promote standardization process
The launch of ERC-7401 marks the further advancement of the NFT standardization process. By introducing a nested structure, ERC-7401 provides a new direction and idea for the standardization of NFT, and promotes the normalization and standardization of NFT technology and applications. It not only helps to improve the technical level of NFT, but also enhances the trust and recognition of the market.
Technical implementation and challenges
The technical challenge of implementing the ERC-7401 standard lies mainly in how to efficiently process and store a large amount of nested information. In addition, the security of smart contracts is also an important consideration, because complex interactions and nesting may increase the risk of smart contracts being attacked. Developers need to optimize the performance and cost of contracts while ensuring the security and functionality of the contracts.
Prospects and Outlook
As the NFT market continues to develop, the introduction of the ERC-7401 standard has undoubtedly brought new vitality and possibilities to the market. It not only provides users with more flexibility and choices, but also opens the door to innovative applications for developers. In the future, we can foresee that ERC-7401 will exert its unique influence in more fields and promote the further integration and innovation of digital assets and blockchain technology. With the promotion and application of this standard, the future NFT market will be more diversified and dynamic, providing users and developers with a richer and deeper digital asset experience.