Original Author: Miko

Original source: A&T Capital

People usually divide NFT projects into several categories such as trading platforms, games, art, collectibles, and virtual worlds. These are actually NFT applications seen by top-level users or Dapps built on top of the protocol layer. If you analyze it from a more global perspective, in addition to Dapp, there are also the underlying infrastructure and intermediate network protocols that serve NFT. For example, the NFT trading platform is an application based on NFT standards such as ERC721 or ERC1155 built on the underlying foundation (Ethereum, WAX, Polygon). The underlying infrastructure provides performance and interoperability for the trading platform, and the ERC standard limits the usage scenarios of the top-level application.

In terms of functional attributes, the NFT industry chain can be divided into three layers from top to bottom:

• One is: the application layer, what users see and use every day;

• The second is: the protocol layer, the technology stack between the NFT application layer and the computing layer;

• The third is: the settlement layer, which is responsible for the storage and recording of the value of NFT.

The protocol layer is a key module between the settlement layer and the application layer. The unified protocol standard on the chain can effectively reduce the threshold and difficulty of NFT asset issuance, and solve the problems of asset security, authenticity, liquidity and decentralization in the NFT market. Currently the most widely used are the ERC721 protocol and the ERC1155 protocol.

This article will take stock of the existing NFT protocols in turn, including ERC721, ERC1155, ERC998, NFT lease agreement, EIP2981, liquidity agreement and cross-chain agreement.

NFT standard agreement

• ERC721 — Metadata structure of NFT tokens on Ethereum. The first standard to represent NFT assets, created by Dapper Labs Dieter Shirley and brought to market by CryptoKitties

• ERC1155 —— Manage multiple types of NFT in a single smart contract

• ERC998—— Nestable NFT, that is, the binding relationship of multiple NFTs

• EIP2981— NFT Royalty

• ERC1523— NFT as an insurance policy

• EIP1948—— NFT with changeable information

• ERC875—— Batch transfer NFT

In addition to the mainstream ERC-721 and ERC-1155, some NFT underlying public chains have begun to develop protocols on the NFT chain, such as DNFT, a decentralized NFT protocol that supports cross-chains, and supports the development of NFT asset-related creation, transactions, and analysis , derivatives, data and other products; Vera, a Polkadot ecological NFT lending and liquidity protocol. These belong to the general protocol layer of NFT, which can empower various application scenarios of NFT, such as finance, data, cross-chain, privacy and other tracks. Other NFT general protocol layers can be roughly divided into liquidity protocols and cross-chain protocols.

Different NFT protocols

ERC721

ERC721 is the first formal and widely adopted NFT standard, which defines a set of code rules for recording NFT-related information on the Ethereum blockchain. Although ERC-721 is not mandatory, it is widely accepted as the standard for NFT projects.

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History of ERC721

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Contents of ERC721

ERC-721 assigns two identifiers to any NFT, the contract address and the token ID, the combination of which gives the NFT a unique identity. For example, the contract address of Bored Ape Yacht Club and the token ID of #3749.

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Disadvantages of ERC721

• Not compatible with ERC20

• Only for Ethereum

ERC1155

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History of ERC1155

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Advantages of ERC1155

• Efficiency of transfer and exchange

• Compatible with cross-chain

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Disadvantages of ERC1155

• Difficult to track ownership

ERC 998 -- composable tokens

In terms of composable tokens, it can represent a group of ERC20 tokens or ERC721 tokens or a combination of both, which can be traded in a single transaction. To implement ERC998, you first need to add sub-tokens ERC721 or ERC20 to ERC998. Child tokens can only be transferred from the contract if the sender also has the parent token ID. ERC998 realizes a one-time transfer of all levels and ownership.

Use Cases: Assets in games such as properties in the Metaverse, racing cars in REVV.

The value of an ERC998 token is equivalent to the accumulation of these items in an entity.

Lease agreement (EIP4907/2615/5006)

EIP2615 and EIP4907, split NFT ownership and usage rights for fund providers and NFT borrowers through smart contracts.

EIP2615 - NFT Mortgage and Leasing

EIP2615 is commonly used in NFT rental agreements. The protocol separates the ownership and usage rights of NFT, allowing users to rent their own NFT, or mortgage NFT. In order to implement trustless leasing of NFTs with ERC721, it is necessary to deposit funds as collateral. This is to prevent malicious actions by borrowers, as once ownership is transferred, it is impossible to take it back. With this rental agreement, there is no need for a security deposit anymore, because this rental agreement itself supports leasing and tenant functions. Additionally, no escrow of title is required when taking out a mortgage. This is to protect against the potential risk of default on the mortgage. However, using ERC721 as collateral for collateral damages the utility of NFTs. Since most NFT applications provide services to NFT pawnholders, NFTs are basically not exploitable under escrow. With ERC2615, it is possible to spend NFTs while staking them, which makes NFTs more efficient.

Leasing of NFTs

1. Separation by account service

• Account service outside the chain - CEX mode

  Project: Axie Scholar Program

  Disadvantages: Complicated due to different functions of NFT, rights distribution issues, for developers, integration and scalability issues, need separate front end, trust in account services, not open and interoperable

• Account service on the chain - multi-signature wallet

  Project: Pine, 99 starz

  Advantages: Solve the problem of trust

  Disadvantages: front-end integration from Dapp is required, no key and signature cannot be provided, integration with other Dapps (such as opensea), Gas cost and security

2. Separation by project

• Dual role --EIP4907

  Projects: ENS (controller), Decentraland (Operatpr), Double protocol

  Pros: Permission-free interoperability

  Disadvantages: Heavy BD, requires GameFi or NFT project party to upgrade the smart contract

• Metadata extension -- develop custom smart contracts

  Project: reNFT, Rentable

  Disadvantages: The project trusts user information, development is difficult, and it is difficult to find the information you want

• Wrapped dual role

  Projects: Cyan, Double, BendDAO

  Cons: Heavy BD and scalability

EIP2981-- Royalty

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Royalty types supported by EIP2981

• Atypical, ie a fixed % royalty. For example, 10% goes back to the creator

• Decaying royalties, which can be time-based ownership or any attribute

• Dynamic royalties, i.e. can change over time or with changes in the amount of sales

Liquidity agreement

The application scenario of releasing NFT to provide liquidity in finance. By mortgaging NFT to generate easy-to-circulate ERC20 tokens to improve the liquidity of NFT. For example, Unicly, NFT holders create their own uToken on the Unicly protocol. The protocol generally mortgages and fragments a set of NFT collections, mints a corresponding number of ERC20 tokens, and then participates in liquidity mining, transactions, etc.

Cross-chain protocol

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