What are ERC-721 and ERC-1155 Smart Contracts?
Experienced Smart Contract Team
Is your business using blockchain technology and smart contract applications? Do you need comprehensive legal advice on smart contracts or need to know whether you have any compliance obligations under the law?
If so, then do not wait a second longer to secure the legal advice you need from an experienced blockchain team of attorneys.
As smart contracts become more advanced and sophisticated, they are able to support multiple applications. It is only inevitable that the standards used to create applications—including NFTs—should also advance.
Thus, we have both ERC-721 and ERC-1155 for token standards. Understanding the difference and how they may impact your business project can be complex.
At Oberheiden, P.C., we have a dedicated team of Blockchain and Smart Contract attorneys who can advise you on smart contract applications and provide overall compliance reviews on your recent or upcoming project.
Do not wait to get the legal advice you need. Put Oberheiden, P.C. on your side today to advise you on the ever-expanding area.
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Smart Contracts: An Introduction
Definition
A smart contract is an agreement written in computer code. The code is made up of a set or rules that the parties to the contract have previously agreed upon.
If those predefined events or conditions occur—the “triggering events”—the smart contract code is automatically executed.
Smart contracts can interact with multiple systems simultaneously to produce various, pre-defined results depending on the situation. The essence of a smart contract is to have a decentralized system that automatically executes an agreement that the parties already agreed to and created without having to take further action.
Smart contracts use and are stored on blockchain technology—meaning that they cannot be modified or tampered with.
Process
While it may sound complicated, the process of smart contract formation and execution is relatively straightforward.
The first step involves negotiation and creation of the smart contract by the parties to the agreement. The agreement is written in computer code and transferred to the blockchain. While the names of the parties to the contract are kept confidential, the details of the smart contract is transparent on the blockchain. The second step involves the automatic execution as per the pre-written computer code.
Think of a smart contract as being composed of a series of “if…then” or “when…then” statements. The execution of these statements is not activated unless or until the “if” or “when” statements occur. Examples of “if” and “when” statements include “if the contract is received” or “when the deposit is made.”
Once the condition occurs, the computer network executes the action or whatever command that is detailed by the “then” statements. Examples of “then” commands include “issue the refund” or “pay the bill.”
The Difference Between ERC-721 and ERC-1155
In the Beginning
Originally, tokens used the ERC-20 standard. This standard was typical for older uses such as DAI functions. Under the ERC-20 standard, all assets are treated interchangeably—meaning they are all treated the same.
This worked well at first for Ethereum-powered smart contracts and smart contract applications. This standard was very successfully and was both easy to use and facilitated the creation of many projects.
That said, Ethereum´s potential grew, and developers and programmers sought to capitalize even further on smart contracts.
The main output involved the non-fungible tokens—NFTs. NFTs allowed for an entirely different set of application on smart contracts. However, the non-fungibility of these new tokens demanded a new standard.
This new standard for unique, custom tokens was called ERC-721, followed by a revised token standard, the ERC-1155.
ERC-721 versus ERC-1155
The ERC-721 standard was created in 2018 by William Entriken, Dieter Shirley, Jacob Evans, and Natassia Sachs for use on the Ethereum Blockchain. It allows users to tokenize data and make each token—which represents a single, individual asset—unique, or non-fungible.
This standard allows users to transfer NFTs between other accounts and trade NFTs for other currencies. Because the ERC-721 standard basically fostered the NFT market, it is the most popular. The best example of this token standard is the project, CryptoKitties.
The next standard is the ERC-1155 developed by Enjin. The ERC-1155 is an improved standard for tokens using the Ethereum Blockchain. This standard facilitates both fungible (including semi-fungible) and non-fungible tokens.
To be clear, ERC-1155 has the same function and scope of the ERC-721 as well as the ERC-20 token standards. What sets it apart are its improved efficiency and operability.
Another benefit is the reduced costs. For instance, gas fees are reduced by up to 90%, making this standard very affordable for all individuals seeking to create NFTs and facilitate their trading.
Advantages of ERC-1155
Below is a summarized list of the advantages of the ERC-1155 token standard compared to the prior standards:
- More uses of the smart contract: can be used to mint either fungible or non-fungible tokens.
- Reduced costs: reduces the gas fees for minting an NFT.
- Improved efficiencies: allows for multiple operations to be run in a single transaction.
- Less storage space: takes up less space on the blockchain.
- Increased verification: ability to check whether the transaction is valid.
- Multiple transfers: can transfer entire batches of tokens as opposed to individually.
If you have questions about the above functions or need a more in-depth analysis of the difference between the ERC-721 and the ERC-1155 token standards, then do not hesitate to give our Blockchain Team a call today.
Need Legal Advice with ERC-721 and ERC-1155 Smart Contracts?
Smart contracts are an innovation to making agreements that involve various factors. They allow for transactions to be made in a permanent manner and then executed automatically without any action or interference.
Smart contracts use either the ERC-721 or ERC-1155 standards, the difference of which lies in efficiency, costs, and advanced capabilities. If you are seeking to launch a project that involves fungible tokens or NFTs, you need the advice of an attorney experienced in smart contracts.
At Oberheiden, P.C., we have an experienced and knowledgeable group of Blockchain attorneys who can advise you on the execution of your smart contract.
Do not proceed with a significant investment opportunity or business venture involving smart contracts or cryptocurrencies without getting the legal advice you need.
Call or contact us today for a free and 100% confidential communication.
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