Understand ERC-7401 in one go, a brand new chapter of nested NFT standards.

Author: NFTScan

In today's rapid development of digital assets and blockchain technology, non-fungible tokens (NFTs) have become an important form of assets, widely used in multiple fields such as art, gaming, and collectibles. With the diversification of market demand, traditional NFT standards such as ERC-721 and ERC-1155 have not been able to fully meet the needs of users, especially in terms of flexibility and interactivity. In response to these challenges, various innovative protocol standards have emerged in the market. This article mainly explores ERC-7401 for its introduction of the concept of nested NFT, opening up new possibilities for the functionality and flexibility of NFTs.

What is ERC-7401?

ERC-7401, also known as Parent-Managed Nestable Non-Fungible Token, was initially named ERC-6059, but it was later revised and given a new number after many community comments. The standard was proposed in 22 and was not finalized until September 23. Its future applications are yet to be observed, but it will bring improved functionality. Its core innovation lies in allowing a NFT (parent NFT) to contain one or more other NFTs (child NFTs), thereby opening the door to managing and interacting with multi-level assets.

This standard extends the basic NFT standard to allow nesting and parent-child relationships between NFTs. In simpler terms, NFTs can own and manage other NFTs, creating a hierarchical structure of tokens. This structure allows users to more flexibly manage and trade their digital assets, while also providing more possibilities for the creation and use of NFTs. Compared to other standards, ERC-7401 is more focused on scalability and interactivity in its design, aiming to meet more complex application requirements.

Concepts and Innovations of ERC-7401

We are accustomed to the fact that only user wallets or smart contracts can own NFTs, but non-fungible items can also be "nested" among each other. The technical implementation of the ERC-7401 standard is based on several core points:

Multi-level nesting: Supports unlimited levels of NFT nesting, where each parent NFT can contain multiple child NFTs, and these child NFTs can themselves become parent NFTs for other NFTs. This multi-level structure not only provides great flexibility for asset composition and splitting, but also allows for more complex asset relationships and management strategies to be implemented.
Asset management flexibility: Users who own parent NFTs can freely manage their internal child NFTs, including but not limited to adding, removing, or replacing them. This is particularly important in managing complex asset collections, such as art series or multiple equipment within a game.
Interoperability across collections: Parent NFTs and child NFTs can belong to different NFT collections, providing great flexibility for cross-brand or cross-platform collaborations. For example, an NFT for a movie series can contain limited edition art pieces from multiple different artists.

Diversified Application Scenarios

The practical application scenarios of ERC-7401 are wide-ranging and diverse, including but not limited to the following aspects:

Gaming industry: Game developers can use ERC-7401 to design more complex in-game economic systems. For example, a character NFT (parent NFT) can contain multiple equipment NFTs (child NFTs), which can be updated or traded individually, thereby increasing the strategic depth of the game and the engagement of players. Not only does it centralize asset management, but it also allows for adjusting a character's abilities and appearance through trading of child NFTs.
Art and collectibles: Artists can create collection NFTs (parent NFTs) containing multiple pieces of work, providing both centralized and decentralized ways of collecting. This not only facilitates artists in managing and selling their work, but also provides collectors with more choices and flexibility.
Community management: The ERC-7401 standard also has important applications in community management. Through ERC-7401, communities can create parent community NFTs containing multiple sub-communities or activities. For example, a large community can act as a parent NFT, with different activities, meetings, and sub-communities as child NFTs. This allows community managers to more conveniently organize and manage community activities, and enhance community participation and cohesion.
Identity and certificates: In terms of digital identity authentication, individuals or organizations can issue a parent NFT containing multiple certifications or qualifications. Each certificate is stored as a child NFT, making it easier to manage and verify an individual's multiple identities or qualifications.

Impact of ERC-7401 on the NFT Ecosystem

1. Enhancing the value and liquidity of NFTs

By introducing a nested structure, the ERC-7401 standard can enhance the overall value and liquidity of NFTs. A parent NFT containing multiple child NFTs often has a higher value than the sum of individual NFTs. Additionally, the unified management and trading of nested NFTs can greatly increase the liquidity of NFTs, promoting market activity.

2. Stimulating innovation

The ERC-7401 standard provides developers and creators with more space for innovation. Through the nested structure, developers can design more complex and rich digital assets, sparking more creativity and applications. For example, in games, developers can design game assets with multiple levels and complex relationships, thereby enhancing the depth and fun of the game.

3. Optimizing user experience

The introduction of the ERC-7401 standard can greatly optimize the user experience. By uniformly managing and trading nested NFTs, users can more conveniently manage and trade their digital assets. In addition, the nested structure can more intuitively display the hierarchy and relationships of digital assets, enhancing user understanding and operational experience.

4. Driving the standardization process

The introduction of ERC-7401 signifies further advancement in the standardization process of NFTs. By introducing a nested structure, ERC-7401 provides new directions and ideas for the standardization of NFTs, promoting the normalization and standardization of NFT technology and applications. This not only helps to improve the technical level of NFTs, but also enhances market trust and recognition.

Technical Implementation and Challenges

The main technical challenges in implementing the ERC-7401 standard lie in how to efficiently handle and store a large amount of nested information. In addition, the security of smart contracts is also an important consideration, as complex interactions and nesting may increase the risk of smart contract attacks. Developers need to ensure the security and functionality of the contract while optimizing its performance and cost.

Prospects and Outlook

With the continuous development of the NFT market, the introduction of the ERC-7401 standard undoubtedly brings new vitality and possibilities to the market. It not only provides users with more flexibility and choices, but also opens the door to innovative applications for developers. In the future, we can anticipate ERC-7401 to exert its unique influence in more areas, driving further integration and innovation of digital assets and blockchain technology. With the promotion and application of this standard, the future NFT market will become more diverse and dynamic, providing users and developers with a richer and more in-depth digital asset experience.

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