A Beginner's Guide to the ERC-6551 Standard: A Game Changer for NFTs

Author: WilliamMPeaster, Bankless; Translation: Jinse Finance xiaozou

1. Basic knowledge of ERC-6551

(1) Background introduction

ERC-6551 is a new token standard that will be released on the Ethereum mainnet on May 7, 2023. The standard greatly enhances the functionality of ERC-721NFTs, allowing them to function as their own smart contract accounts, making them more versatile and useful than ever before.

(2) Why release ERC-6551

The motivation for the release of ERC-6551 comes from the increasing use of NFTs as a form of on-chain identity. So far, ERC-721 tokens do not have proxy functions or own other on-chain assets, which is out of sync with real-world use cases for non-fungible assets.

Therefore, ERC-6551 solves this problem by granting each ERC-721 token the full functionality of an Ethereum account, while maintaining compatibility with existing ERC-721 contracts. This is done by deploying a unique smart contract account (called a "token-bound account") for each ERC-721 token using a permissionless registry.

Note that a single NFT can also have multiple token-bound accounts via ERC-6551. In this sense, one NFT can now contain multiple wallets and so on.

(3) ERC-6551 operating principle

The system introduced by ERC-6551 is mainly composed of two parts: a permissionless registry for deploying token-bound accounts and a standard interface for interacting with these accounts.

(4) What can be done with ERC-6551

Thanks to the ERC-6551 standard, you can now use ERC-721NFTs for anything you can do with a regular Ethereum wallet. Of course, the most basic use is to use your NFT to store other NFTs, trade ERC20, etc. However, this is just the tip of the iceberg!

For example, let's say you acquire a set of NFT wearables in a new web3 game. You can now store them in an NFT of your choice (such as your player avatar in this game) instead of keeping them in your regular Ethereum wallet. Not only will this feel psychologically more interesting and familiar, but if you don’t want to play the game again in the future, you can also consider selling your player avatar and accumulated wearables as a whole on the NFT market via ERC-6551 .

This is just a hypothetical example, but there are indeed many possibilities. As another example, the PFP project can now incentivize people to focus on the expanding utility of their collectibles by airdropping rewards to any collector who holds a token-bound account.

Additionally, ERC-6551 allows NFTs to have multiple token-bound accounts and supports multi-chain token-bound accounts, which provides an additional layer of utility that is sure to set off a new wave of experimentation and innovation throughout the NFT space.

(5) WARNING

Not all NFT projects are compatible with the ERC-6551 standard. That is, projects whose smart contracts do not rely on the ownerOf method are not compatible with the ERC-6551 standard, such as CryptoPunks.

In addition to the lack of comprehensive ERC-721 support, there are two major security issues with ERC-6551, and everyone needs to be vigilant about the NFT ecosystem:

undefined Fraud: Decentralized marketplaces need to be wary of potential scams. For example, a user sold an NFT that purportedly held a certain amount of ETH, but withdrew the ETH after the sale, leaving the buyer with an empty account. Some suggestions for ways to prevent such scams include tracking token-bound account balances and ensuring that asset commitments remain the same during transactions. However, the problem of fraud is not directly addressed in ERC-6551 and needs to be addressed at the market level or through external smart contracts.

Undefined ownership cycle issue: ERC-6551 may cause NFT to be transferred to its own token-bound account, making all assets in the account permanently inaccessible. This creates an "ownership cycle" that is difficult to prevent on-chain due to the infinite search space required. Although it is outside the scope of the ERC-6551 standard, it is recommended that applications take interface measures to limit such transfers.

2. Related comments on ERC-6551

• Benny Giang, co-author of ERC-6551 and co-founder of FuturePrimitive, said: "The idea is simple... What if NFTs had their own wallets? Inspired by Soul-Bound Tokens (SBT), we thought backwards and called them Token Bound Accounts (TBA), we bind wallets to NFTs instead of NFTs to wallets.”

• Gami, member of NounsDAO, founder of GnarsDAO and TingsDAO, said: "ERC-6551 (token binding account) is my idea of my own Nouns since I joined NounsDAO. The concept of "entrepreneurs" is completely possible. Nouns can join them Acquired and sold along the way along with what was created."

• Solidity engineer 0xBeans.eth said: "ERC-6551 is probably one of the more interesting Ethereum application layer improvement proposals... a lot of interesting properties appear, such as tradeable accounts... ENS is a step towards on-chain identity, In my opinion, NFTs with full Ethereum accounts would be the next step. This EIP is closely related to EIP4337 (Account Abstraction). There is a reference implementation that basically creates 2 ETH accounts and binds them to the token.”

3. How to use ERC-6551

Tokenbound is a set of open source tool components based on the ERC-6551 standard. One of the services it provides is the account browser interface, which you can use to deploy ERC-6551 accounts and interact with others.

If you want to deploy a token-bound account to the NFT of your choice, you can follow these steps:

(1) Access and connect the wallet of your choice

(2) Click the "MyNFTs" button

(3) Select the NFT you want and click the "DeployAccount" button

(4) Confirm the deployment transaction with your wallet and wait for the transaction to complete

(5) The operation is complete! You'll now see a "Use Wallet" option on the dashboard for the NFT you've chosen; at the time of writing, I got a "coming soon..." message, so expect the full rollout shortly Function.

Also note that ERC-6551 has only just gone live on mainnet and the tools around it are just beginning to be developed. We look forward to seeing various "user experience" and "user interface" developments.

4 Conclusion

The arrival of ERC-6551 is a historic milestone in the NFT field. By turning NFT into your own smart contract account, it opens up a world full of new possibilities. This brings more versatility to NFTs and also aligns them more closely with real-world use cases, making them more useful and relevant to users. We will see more and more adoption and experimentation with ERC-6551 in the coming months!

Also, whenever skeptics say that NFTs are “right-click to save,” we can now deploy token-bound accounts to NFTs, making that allegation even more unfounded. Of course, you can copy and save the picture, but you cannot copy and save the content of the picture.