Will ERC 6551 Transform Ethereum Metaverses With NFT Owned Wallets?

The proposed ERC 6551 token standard for NFTs is sparking interest among crypto enthusiasts as it would allow digital assets to own other tokens, a development that could significantly change the NFT and metaverse landscape.

In a conversation with Laura Shin on a recent episode of the Unchained podcastBenny Giang and Jayden Windle, two of the authors of the Ethereum Improvement Proposal (EIP) for ERC 6551, stated that this new standard allows NFTs to own other tokens, essentially equipping them with their own “wallets.”

What is ERC 6551?

The token standard proposal, introduced in February, focuses on creating a system that assigns a smart contract account to each ERC-721 (non-fungible token). This allows these tokens to own assets and interact with applications without modifying existing ERC-721 smart contracts or infrastructure.

This system consists of two main components: a permissionless registry for deploying token-bound accounts and a standard deployment interface.

The Registry will implement a unique smart contract account for each ERC-721 token, enabling the token to communicate with the blockchain, record transaction history, and own on-chain assets. Control of each token-bound account is delegated to the owner of the ERC-721 token, allowing the owner to initiate on-chain actions on behalf of their token.

The proposal attempts to be maximally backward compatible with existing non-fungible token contracts. It also uses EIP-155 chain IDs to uniquely identify ERC-721 tokens, allowing for optional support of multi-chain token-bound accounts.

Developer response

Initial developer discussion for the proposal focused on potential security implications, such as the risk of duplicate registers and the need for trust verification. Suggestions included creating a registry for wide account implementation registration and making the proposal’s registry canonical due to its permissionless nature.

The potential implications of the proposal for reducing airdrop costs were also highlighted, along with a discussion that also raised security concerns about adding metadata to the NFT Registry.

More recently, with over 160 comments from Ethereum developers, concerns were raised that the proposal is still in “Draft” status, potentially subjecting it to significant changes. Finally, there were discussions about finalizing the naming of functions and the possible consequences for those who run the EIP.

Benefits of ERC 6551

As Giang explained on the Unchained Podcast, ERC 6551 was sparked by a simple question:

“What if we had a project that was an NFT project with a character, and sometimes we call it a PFP (Profile Picture) project, right? Our main question was why can’t you change the clothes or the aesthetic of this PFP character?

This demand led to the introduction of the ERC 6551 standard, which allowed NFTs to own other tokens, effectively giving them their own ‘wallet’.

Giang further added,

“Do you follow the off-chain way you build a database and have all this kind of centralization where you could display the NFT? Or you choose the on-chain way, like any item that can apply an NFT on-chain as a transaction.

So on this kind of journey, feeling in the dark for the past eight or nine months, we realized there was a possible solution.

Giang and Windle also discussed the pros and cons of pursuing the on-chain or off-chain method of applying any asset an NFT might own as a transaction.

They concluded that the ERC 6551 standard was a possible solution to the limitations of previous attempts to standardize asset-owning NFTs, such as the need for custom logic in their smart contract. The ERC 6551 standard overcomes these limitations and grants NFTs the same rights as Ethereum users, allowing them to own assets and take action.

The podcast guests also highlighted that while ERC 721, ERC 1155, and soul-bound tokens exist as ways to own items on Ethereum, ERC 6551 is not a token standard in the traditional sense because it gives each existing ERC 721 its own wallet, so it unlocking a new compatibility layer for NFTs.

Use cases from ERC 6551

The implementation of ERC 6551 has created exciting prospects in several industries, according to the EIP authors. It allows NFTs to own assets and perform actions autonomously, potentially benefiting gaming, DAOs, infrastructure and tooling, and social networks.

Giang mentioned several projects, such as “Sapiens,” “Fuel Worlds,” and “Parallel Trading Card Game,” that leverage the standard for gamification. Giang commented, “It makes a lot of sense for a decentralized game inventory.” Thus, such games allow characters to have their own wallets and act independently in the game.

According to Giang, decentralized autonomous organizations, or DAOs, such as “Station” and “Dow House” are also looking into this standard to monitor engagement within their communities. Furthermore, the infrastructure and tool industries, represented by ‘Manifold’, ‘Nosis Guild’ and ‘Rabbit Hole’, are reportedly working on modules around the standard.

Giang suggested a future where NFTs could become Network Playable Characters (NPCs), digital entities that can perform on-chain actions controlled by a human or an AI model. This could potentially solve the “empty world problem” seen in many digital worlds.

The ERC-6551 proposal, as explained by Jayden Windle, is simple.

“A token-bound account is its own type of wallet by this standard. So an NFT can have a unique wallet address that can own all of the assets — a concept Windle describes “becomes pretty fractal pretty quickly.”

According to this standard, a token-bound account is its own type of wallet. Therefore, an NFT can have a unique wallet address to hold assets. However, it is important to note that while any Ethereum wallet can manage an NFT’s wallet, ownership of the token-bound account will always be owned by the NFT.

If approved, the advent and adoption of the ERC 6551 standard could represent a major development, extending the functionality of NFTs and improving their usability.