Finn

Introduction#

Non-Fungible Tokens (NFTs) have shown great potential in various fields such as digital art, gaming assets, and virtual real estate as an important application of blockchain technology. In the Ethereum ecosystem, ERC-721 is the earliest and most widely used NFT standard, while ERC-721C is a newly emerged NFT standard that focuses on addressing royalty mechanism issues. This article will compare the differences between these two standards in detail, helping readers better understand their characteristics and applicable scenarios.

Overview of ERC-721 Standard#

Historical Background#

The ERC-721 standard was officially released in 2018, proposed by William Entriken, Dieter Shirley, Jacob Evans, and Nastassia Sachs. The emergence of this standard marked the formal establishment of the NFT concept, providing a unified interface specification for the creation and management of non-fungible tokens.

Technical Features#

The core features of ERC-721 include:

1. Uniqueness: Each token has a unique uint256 ID, making each NFT unique.

2. Indivisibility: NFTs cannot be divided into smaller units like ERC-20 tokens.

3. Ownership Management: Provides basic functions for transferring and tracking NFT ownership.

4. Metadata Support: Allows for detailed metadata to be included, such as creator, title, description, and other information.

Standard Interface#

The ERC-721 standard defines the following core interfaces:

interface ERC721 {event Transfer(address indexed _from, address indexed _to, uint256 indexed _tokenId);
    event Approval(address indexed _owner, address indexed _approved, uint256 indexed _tokenId);
    event ApprovalForAll(address indexed _owner, address indexed _operator, bool _approved);
    
    function balanceOf(address _owner) external view returns (uint256);
    function ownerOf(uint256 _tokenId) external view returns (address);
    function transferFrom(address _from, address _to, uint256 _tokenId) external payable;
    function approve(address _approved, uint256 _tokenId) external payable;
    function setApprovalForAll(address _operator, bool _approved) external;
    function getApproved(uint256 _tokenId) external view returns (address);
    function isApprovedForAll(address _owner, address _operator) external view returns (bool);
}

Limitations#

Although ERC-721 laid the foundation for the development of NFTs, it also has some limitations:

1. Imperfect Royalty Mechanism: ERC-721 does not include a mechanism for enforcing royalties, making it impossible for creators to automatically earn revenue from secondary market transactions.

2. Low Transaction Efficiency: Each NFT transfer requires a separate transaction, leading to high gas fees.

3. Single Functionality: Lacks native support for advanced features such as batch transfers and nested combinations.

Introduction to ERC-721C Standard#

Development Background#

ERC-721C is a new NFT standard proposed by the blockchain gaming company Limit Break, aimed at addressing the shortcomings of the ERC-721 standard in terms of royalty mechanisms. As the NFT market develops, the issue of creator royalties has become increasingly prominent, with some trading platforms allowing users to evade royalty payments, harming creators' rights. ERC-721C is designed to solve this problem.

Core Innovations#

The main innovations of ERC-721C include:

1. Programmable Royalties: Allows creators to enforce royalties directly at the smart contract level, without relying on support from trading platforms.

2. Transfer Security Policies: Creators can define transfer security policies for NFTs, controlling how their NFTs are transferred between wallets and platforms.

3. Flexible Royalty Distribution: Supports a dynamic royalty sharing system that can distribute revenue to multiple stakeholders, including creators, communities, partners, and branches.

Technical Implementation#

ERC-721C implements its functions through the following mechanisms:

1. Minimum Floor Operation Contract: Allows for setting fixed prices for specific NFTs or establishing a minimum floor price for an entire collection.

2. Whitelist Mechanism: Maintains a whitelist of trading platforms, allowing only whitelisted platforms to trade ERC-721C tokens.

3. On-Chain Royalty Enforcement: Enforces royalty payments directly on the blockchain to prevent evasion.

Key Differences Between ERC-721 and ERC-721C#

Royalty Mechanism#

• ERC-721: The royalty mechanism relies on voluntary implementation by trading platforms, lacking enforcement capability.

• ERC-721C: Enforces royalties at the smart contract level, allowing creators to set royalties up to 100% and preventing trading platforms from setting royalties to 0%.

Trading Restrictions#

• ERC-721: No trading restrictions; any platform can support trading.

• ERC-721C: Trading is only allowed on whitelisted platforms, increasing control over trading channels.

Royalty Distribution#

• ERC-721: Typically only supports simple royalty distribution to creators.

• ERC-721C: Supports complex royalty distribution mechanisms that can allocate royalties to multiple stakeholders based on different conditions.

Community Building#

• ERC-721: Lacks a native community incentive mechanism.

• ERC-721C: Can incentivize community members through royalty sharing, such as automatically distributing sales royalties to DAO members or competition winners.

Application Scenario Comparison#

Suitable Scenarios for ERC-721#

1. General NFT Projects: General NFT projects with low royalty requirements.

2. Wide Compatibility Needs: NFTs that need to trade seamlessly across multiple platforms.

3. Simple Implementation: Projects with limited development resources seeking quick deployment.

Suitable Scenarios for ERC-721C#

1. Artist and Creator-Led Projects: Creators with a strong demand for royalty income.

2. Long-Term Community Building: Projects that aim to incentivize community participation through royalty sharing.

3. High-Value NFT Collections: NFT projects with higher value that require stronger protection mechanisms.

4. Specific Platform Ecosystems: Projects willing to restrict trading to specific platforms in exchange for better royalty protection.

Market Adoption Status#

ERC-721#

As the earliest NFT standard, ERC-721 has been widely adopted, including:

1. CryptoKitties: One of the earliest successful NFT projects to adopt the ERC-721 standard.

2. Bored Ape Yacht Club: A well-known PFP (profile picture) NFT project.

3. Most NFT Trading Platforms: Mainstream platforms like OpenSea and Rarible support ERC-721.

ERC-721C#

As an emerging standard, ERC-721C is gradually gaining support:

1. OpenSea: Has announced the implementation of ERC-721C standard to support creator royalties.

2. Magic Eden: Has supported ERC-721C token trading.

3. Limit Break: As the proposer of the standard, its gaming projects adopt this standard.

Pros and Cons Analysis#

Advantages of ERC-721#

1. Wide Compatibility: Supported by most wallets and trading platforms.

2. Mature and Stable: Relatively mature technology after years of development.

3. Simple Development: Low implementation difficulty with abundant documentation and resources.

Disadvantages of ERC-721#

1. Weak Royalty Enforcement: Cannot enforce creator royalties.

2. Limited Functionality: Lacks native support for advanced features.

3. High Transaction Costs: Individual NFT transactions require separate transaction fees.

Advantages of ERC-721C#

1. Royalty Protection: Enforces creator royalties, protecting creators' rights.

2. Flexible Distribution: Supports complex royalty distribution mechanisms.

3. Community Incentives: Can be used for community building and long-term incentives.

Disadvantages of ERC-721C#

1. Limited Compatibility: Can only trade on platforms that support this standard.

2. Centralization Risks: The whitelist mechanism is controlled by Limit Break, posing centralization risks.

3. Complex Implementation: Higher implementation difficulty requiring more development resources.

Future Development Trends#

As the NFT market continues to evolve, we can anticipate the following trends:

1. Standard Integration: Some innovative features of ERC-721C may be integrated into broader standards.

2. Royalty Mechanism Improvements: More solutions regarding royalty enforcement will emerge.

3. Platform Adaptation: More trading platforms will support ERC-721C or similar standards.

4. Increased User Choices: Creators will have more options to protect their rights.

Conclusion#

ERC-721 and ERC-721C represent two different development directions for NFT standards. ERC-721, as a foundational standard, provides the core functionalities of NFTs, while ERC-721C focuses on addressing royalty issues, offering better protection for creators.

When choosing which standard to use, project teams need to weigh their needs: if broad compatibility and simple implementation are priorities, ERC-721 may be the better choice; if royalty protection and creator rights are the primary considerations, then ERC-721C provides a more robust solution.

As the NFT ecosystem continues to develop, we can expect to see more innovative standards emerge, bringing richer possibilities to the blockchain world.

References#

1. ERC-721: Non-Fungible Token Standard. https://eips.ethereum.org/EIPS/eip-721

2. Detailed Explanation of ERC721-C: A New NFT Standard Focused on Royalty Design. https://www.theblockbeats.info/news/37007

3. What Is ERC721-C NFT Explained - Which Markets Support It. https://milkroad.com/guide/erc721-c/

4. What Is ERC721-C, and Could It Solve Web3's Royalty Issues? https://nftnow.com/features/what-is-erc721-c-and-could-it-solve-web3s-royalty-issues/