{"id":24324,"date":"2023-07-26T14:52:00","date_gmt":"2023-07-26T14:52:00","guid":{"rendered":"https:\/\/dexola.com\/blog\/?p=24324"},"modified":"2024-07-15T14:54:23","modified_gmt":"2024-07-15T14:54:23","slug":"what-is-erc-6551-token-standard","status":"publish","type":"post","link":"https:\/\/dexola.com\/blog\/what-is-erc-6551-token-standard\/","title":{"rendered":"ERC-6551 Token Standard: What Is It and Top Use Cases"},"content":{"rendered":"\n

ERC-6551<\/a>\u00a0token standard is an NFT that owns a separate account and thus can own and transfer other tokens on behalf of its owner. This standard expands NFT applications from PFP which you can dress up with other tokens to a decentralized tradable portfolio that holds some fungible tokens.<\/p>\n\n\n\n

In other words, ERC-6551 NFT allows user to control a separate account if the user owns a particular NFT.

Read on for the capabilities and limitations of ERC-6551 explained.<\/p>\n\n\n\n

NFTs hold other NFTs? Why not?<\/h2>\n\n\n\n

Token standard is a guideline on how to do tokens\u2019 smart contracts development<\/a>, which functions to implement, and how to store data, so wallets, explorers, and DApps will work with them out of the box. These standards are often called ERC.<\/p>\n\n\n\n

The most popular token standard is ERC-20<\/a> \u2014 Ethereum Request for Comment 20. Most fungible token smart contracts store only two values: addresses that own tokens and the number of tokens they own. E.g. address Alice owns 700 tokens TOKEN.<\/p>\n\n\n\n

The second most popular standard is ERC-721<\/a> for non-fungible tokens \u2014 NFTs. These contracts store addresses, unique token IDs, and token numbers. For example, address Bob owns 1 token TokenizedApe with ID 001.<\/p>\n\n\n\n

Developers may expand token possibilities and explore new use cases by modifying those standards while preserving core functions and features. Tether added a \u201cblacklist\u201d function to ERC-20 to freeze USDT transactions on malicious addresses. The RMRK project also modified an ERC-721 so it can own other NFTs.<\/p>\n\n\n\n

But there is a problem with just modifying standard contracts. First, custom non-standard functions require custom handlers. Second, developers can\u2019t change already deployed smart contracts, so to implement nesting functionality to BAYC they will need to deploy it again.<\/p>\n\n\n\n

How does ERC-6551 solve the backward compatibility problem?<\/h2>\n\n\n\n

ERC-6551<\/a> does not modify the ERC-721 account to add functions. Instead, it allows the owner to deploy a deterministically-addressed smart contract account for an existing ERC-721 token, so the NFT can interact with it. That smart contract can hold and transfer ERC-20, ERC-721, ERC-1155, and other tokens. The control of ERC-6551 is delegated to the ERC-721 owner.<\/p>\n\n\n\n

This design allows developers to expand the capabilities of any existing ERC-721 token and make them backward compatible with any existing web3 app on any platform.<\/p>\n\n\n\n

ERC-6551 token consists of three parts:<\/p>\n\n\n\n