Read ERC-7401 in one article: a new chapter in the nested NFT standard

Written by: NFTScan

Today, with the rapid development of digital assets and blockchain technology, non-fungible tokens (NFT) have become an important Asset form, widely used in art, games, collectibles and other fields. With the diversification of market demands, traditional NFT standards such as ERC-721 and ERC-1155 can no longer fully meet the needs of users, especially in terms of flexibility and interactivity. In order to address these challenges, a variety of innovative protocol standards have flooded into the market. This article mainly explores ERC-7401 because of its introduction of the nested NFT concept, which opens up new possibilities for the functionality and flexibility of NFTs.

What is ERC-7401?

ERC-7401, Parent-Governed Nestable Non-Fungible Token, was originally named ERC-6059 but was later revised and given a new number after many community comments. This standard was proposed in 2022 and was only finalized in September 2023. Its future application remains to be seen, but it will bring improved functionality. Its core innovation is to allow one NFT (parent NFT) to contain one or more other NFTs (child NFTs), thus opening the door to managing and interacting with multi-layered 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 hierarchy of Tokens. This structure allows users to manage and trade their digital assets more flexibly, while also providing more possibilities for the creation and use of NFTs. Compared with other standards, ERC-7401 is designed to focus more on scalability and interactivity, aiming to meet more complex application requirements.

Concept and Innovation of ERC-7401

We are used to the fact that only user wallets or smart contracts can own NFTs, but it is also possible to "nest" irreplaceable things within each other between. The technical implementation of the ERC-7401 standard is based on the following core points:

• Multi-level nesting: supports unlimited levels of NFT nesting. Each parent NFT can contain multiple child NFTs, and these child NFTs It can also become the parent NFT of other NFTs. This multi-level structure not only provides great flexibility for the combination and splitting of assets, but also allows the implementation of more complex asset relationships and management strategies.
• Asset management flexibility: Users who own a parent NFT can freely manage the child NFTs within it, including but not limited to adding, removing, or replacing. This is especially important when managing complex collections of assets, such as collections of artwork or multiple in-game equipment.
• Cross-collection interoperability: Parent NFT and child NFT can belong to different NFT collections, which provides great flexibility for cross-brand or cross-platform cooperation. For example, an NFT for a movie series could include NFTs of limited-edition artwork from multiple different artists.

Diversification of application scenarios

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

• Games 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, increasing the strategic nature of the game and player participation. Not only does asset management become more centralized, but sub-NFTs can also be traded to adjust the character’s abilities and appearance.
• Art and Collections: Artists can provide a holistic or decentralized collection by creating a collection NFT (parent NFT) containing multiple works. Not only does it make it easier for artists to manage and sell their works, it 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 that contain multiple child communities or events. For example, a large community could serve as a parent NFT, with different events, conferences, and sub-communities within it as child NFTs. In this way, community managers can more conveniently manage and organize community activities and enhance community participation and cohesion. ​
• Identity and Certificates: In terms of digital identity certification, an individual or institution can issue a parent NFT that contains multiple certifications or qualifications. Each certificate is stored as a child NFT, making it easy to manage and verify an individual's multiple identities or qualifications.

The impact of ERC-7401 on the NFT ecosystem

1. Improve the value and liquidity of NFT

By introducing a nested structure, the ERC-7401 standard can Improve the overall value and liquidity of NFT. A parent NFT that contains multiple child NFTs is often worth more than the sum of the individual NFTs. In addition, the unified management and trading of nested NFTs can greatly improve the liquidity of NFTs and promote market activity.

2. Stimulate innovation

The ERC-7401 standard provides developers and creators with more room for innovation. Through the nested structure, developers can design more complex and rich digital assets, inspiring more creativity and applications. For example, in games, developers can design game assets that contain multiple layers and complex relationships, thereby increasing the depth and interest of the game.

3. Optimize user experience

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

4. Promote the standardization process

The launch of ERC-7401 marks the further advancement of the NFT standardization process. By introducing a nested structure, ERC-7401 provides new directions and ideas for the standardization of NFT, and promotes the standardization and standardization of NFT technology and applications. It not only helps to improve the technical level of NFT, but also enhances market trust and recognition.

Technical Implementation and Challenges

The technical challenges in implementing the ERC-7401 standard mainly lie in how to efficiently process and store large amounts 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 contracts being attacked. Developers need to optimize the performance and cost of the contract while ensuring the security and functionality of the contract.

Prospects and Outlook

As the NFT market continues to develop, the introduction of the ERC-7401 standard has undoubtedly brought 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 foresee that ERC-7401 will exert its unique influence in more fields and promote further integration and innovation of digital assets and blockchain technology. With the promotion and application of this standard, the future NFT market will be more diversified and dynamic, providing users and developers with a richer and deeper digital asset experience. ​

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