Last December, the Ethereum network experienced extremely high latency and high transaction fees. The reason? The network was flooded by adorable, one-of-a-kind “Cryptokitties.”
In the game, players collect, breed, buy & sell virtual “CryptoKitties” — it could be called a simple game of “collectibles”. Under the hood, however, this was one of the first implementations of the ERC-721 protocol — a standard for dApps to create and manage non-fungible tokens (NFTs).
Until the release of the ERC-721 protocol, every single token on the Ethereum platform followed the ERC-20 protocol. These tokens are analogous to currency notes. There is nothing that should stop someone from exchanging a one dollar note for another one dollar note. Similarly, a dollar can be broken down into 4 quarters, 10 nickels or 100 pennies.
ERC-20 tokens were built to play a specific role within the protocol or application associated with them. For example, the BinanceCoin BNB (an ERC-20 token) is currently used to pay for transaction fees (at a discount) on the Binance cryptocurrency exchange.
ERC-721 tokens are a completely different crypto-asset class. You can think of these tokens as baseball cards — where each card represents a different player and could consequently represent a different value. A one-to-one exchange is no longer as straightforward.
Cryptokitties was the first project that was launched utilizing ERC-721 tokens so it may not come as a surprise that the founder of this game, Dieter Shirley, was also the person who made the original ERC-721 proposal.
In this game, each kitty is represented by an ERC-721 token and has its own unique 256-bit genome. The different genome equates to each kitty having different features like skin color, patterns, and even qualities (think a kitty with flight capabilities).
This was a game that gained popularity through incredible design. Other games have quickly followed suit with even the MLB creating a collectibles game on the Blockchain. That said, we at the Crypto University believe that there are far more interesting applications for ERC-721 tokens beyond the realm of game collectibles.
Any digital good that needs to prove uniqueness could benefit from this technology. One use case that comes to mind is related to digital event tickets. The ticket issuer could duplicate and resell a ticket for a single seat to multiple customers. If every ticket were represented as an NFT, these counterfeits could be prevented thereby giving consumers greater confidence in what they’re buying.
This is just one possible application. As this ecosystem matures, we are sure more applications beyond the realm of gaming will get built using this protocol.
Special thanks to Aditya Dey for doing a lot of upfront research on this article.