Gems, gold, celebrity memorabilia, and now in-game items; ERC-721 creates value through scarcity.
One of the most exciting aspects of the GamerToken vision is our use of ERC-721 tokenized items. We’re using the technology to add distinct, new levels of value to in-game items — facilitating the dramatic enhancement of in-game item’s value, verifiability, rarity, and security of transfer. The applications of ERC-721 are broad, yet explanations of its features can be complex and jargon-filled. Here’s GamerToken’s breakdown of how it works and how it benefits its adopters.
What is ERC-721?
Non-fungibility, cryptographic verification, verified scarcity…these terms can be pretty off-putting, but ERC-721 (ERC721) can be understood easily. Like many others, ERC-721 is a free open-standard that describes how to build tradable Ethereum tokens on the blockchain. What makes ERC-721 special is that the tokens are unique. Other tokens (like GamerToken’s normal ERC-20 token) are ‘fungible’ — identical to one another. Thanks to distinct identifier codes, ERC-721 tokens are non-fungible — each is unique, like a one-of-a-kind collectible.
Unlike with ERC-20, these ERC-721 tokens cannot be made in batches, each is produced individually and its ownership tracked individually. ERC-721 has evolved from its beta into a community-formalised V1 spec, utilised and endorsed by a large number of reputable projects.
What are the Beneficial Features of ERC-721?
Non-Fungibility: This is the defining feature of ERC-721. As explained, non-fungibility is akin to uniqueness. Tokens in the same contract and class can hold different values to one another. One ERC-721 tokenized asset can be vastly more precious than another.
Security: For the implementation of ERC-721, a smart contract must have a minimum interface implemented that allows unique tokens to be managed, owned, and traded. It includes a “safeTransferFrom()” function that checks for the implementation of a standard interface before tokens are transferred.
Verified Ownership: ERC-721 standards track ownership through an array of ID/index codes. Each token issued by the contract is kept in a running list of tokens in that array. Every token has its respective index place held in the “allTokens” array. Each individual address also contains an array of indexes mapped for proof of ownership. Owners of multiple tokens have their mapped addresses updated when they purchase more.
Compatibility and Functionality: ERC-721 is highly compatible with ERC-20. It shares many similar functions (name, symbol, totalSupply, balanceOf, ownerOf, approve, takeOwnership, transfer, tokenOfOwnerByIndex, tokenMetadata) allowing the tokens to act as common cryptocurrencies like Bitcoin and Ethereum. There is no mandated standard for token metadata and no restrictions for supplemental functionality.
Gaming Case-Study: Understanding the Benefits of Non-Fungibility through “CryptoKitties”
Yes, you read that correctly. CryptoKitties was a well-publicized game that received considerable attention in (and beyond) the crypto-community. ERC-721 plays on our natural instincts to collect things, in this case — digital cats. Each ERC-721-tokenized cryptokitty is ‘bred’ to be unique in some way, thereby turning them into highly sought-after, tradable collectibles. They’ve been described as “breedable Beanie Babies”; even Wikileaks trades CryptoKitties.
From stamps to trading cards to in-game loot, human beings love to collect things. The rarer the item, the more valuable we perceive it to be. Any 90’s kid will tell you how much more valuable a Charizard card is to a regular old Pidgey.
Economists have long been aware that a commodity’s value is reliant upon its scarcity. Diamond reserves are held back by distributors because dispersing them into the market would reduce their profits. Furthermore, the value of identical-looking synthetic diamonds is lower than naturally created diamonds because they don’t share the same unique history.
It’s in our nature, from gems to precious metals, we love to acquire that which is rare. Yet not all that’s gold, glitters — ERC-721 has the power to transfer this scarcity-value to digital assets.
CryptoKitties shows how non-fungible, in-game collectibles can work in the gaming industry. Though with an in-game item trade in the billions, it’s safe to say that CryptoKitties have not conquered the market. GamerToken are going further, far further.
How Does GamerToken Use ERC-721?
Our GamerToken currency works on the standard ERC-20 token, which is readily compatible with ERC-721. Alongside ERC-20, we’re introducing non-fungible, ERC-721 tokenized standards for rare and legendary in-game items. We’re taking advantage of ERC-721’s trackable history function to open new dimensions of value in the item trade.
In-game items’ values will be multiplied if they have a traceable, distinct history. A CS:GO ‘skin’ worn by a winning player in an ESL Pro League will be worth far more than a similar looking skin worn by an average player. This is akin to the value of the football World Cup Final ball being more valuable than a shop-bought ball of the same design.
We provide game developers with the ability to enhance the security and uniqueness of their digital assets and we provide a way to trade them that’s secure, verifiable, and transparent. The current ecosystem for the sale of these rare in-game items is loaded with fraud, fakes, and deceit; this is an essential progression.
All parties involved in a trade have access to cryptographic ownership protections, verifiable rarity, access to a global market, and a vastly eased integration process, thanks to our Universal API. And the benefits don’t stop there:
We empower game-developers with the ability to dictate the rarity of their items; we alleviate gamers’ worries that their items’ value will decrease through the creation of replicas; we allow gamers to design their own unique items; we allow players to loan items to each other while maintaining true ownership; we ensure immutable metadata through unchangeable item properties; and we provide a way to ensure that truly rare items are treated with the respect they deserve.
ERC-721 is a formidable tool. The standard allows a smart contract to track ownership at the individual token level. The use of these unique identifiers (and corresponding item metadata) allows adopters to bring scarcity value into the digital sphere. This difference isn’t to be underestimated, it’s the equivalent difference in value of a false nail versus Lady Gaga’s lost false nail (which sold for $12,000); to some people, neither have much value, to others, one is infinitely more precious.
With some in-game items already selling for tens of thousands of dollars, there is no more exciting place to enact digital scarcity than the gaming sector. Here at GamerToken, we’re using it to facilitate a global marketplace with the atomic transfer of in-game item assets.
For more info about our use of ERC-721, we suggest reading the dedicated sections of our whitepaper. You can find it by visiting our homepage where you can also try-out our working demos: https://gamertoken.com
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