Ever wondered exactly how NFTs are made?

In 2021 non-fungible tokens became the breakout stars of the blockchain industry. Thanks to this, one way or another, pretty much everyone learned about them. However, what most people are familiar with is surface-level data about NFTs. But, in this article, we'll be diving into a lesser-known but crucial side of NFTs. We're digging right into the foundations to examine the underlying properties that have helped make NFTs into the superstars of the digital sphere.

Smart Contracts

Bringing an NFT to life with all the necessary features calls for a smart contract. In simple words, smart contracts are programs on a blockchain that run when predetermined conditions are met. In the context of NFTs, a smart contract serves as the underlying technology that governs the creation, ownership, and transfer of these unique digital assets. These guys take on the bulk of the work when it comes to making non-fungible tokens what they are. Most NFTs are created on the Ethereum blockchain however, there are guidelines for creating smart contracts on Ethereum and these are known as ERCs.

Token Standards and How They Work

ERCs, also known as token standards are smart contract templates. Developers follow them to ensure smart contracts are designed and implemented using a common framework. There are different templates or standards for different smart contracts. These standards are a list of rules explaining how NFTs should be made, owned, transferred, and interacted with. The most popular standard for NFTs is ERC-721.

What is ERC-721?

This standard provides the basic functionality that defines NFTs as an asset class. ERC-721 tokens each have a special ID, like a unique marker that makes them different from other tokens. They also cannot be traded as cryptocurrencies because each token is a one-of-a-kind item. ERC-721 tokens are also transferable across the Ethereum network making it possible to have a market around them.

Another super important thing this standard brings to the table is that it supports additional information about the tokens, like descriptions and images. ERC-721 tokens can be used in various decentralized applications (DApps) and smart contracts, enabling things like gaming, virtual worlds, and decentralized exchanges.

For a long time, ERC-721 was the go-to option for NFT creators.  However, it did have its limitations so variations of the standard such as ERC-721A and ERC-721R were introduced to address them. Let’s talk about those variations;

ERC-721A (Gas Saving)

This NFT standard is a variation of the more common choice, ERC-721.

Gas fees are the bane of every Ethereum user's existence and this extends to NFT buyers and creators. But fear not, with ERC-721A, creators can save a lot of gas when minting multiple NFTs at the same time - batch minting. It's like getting a discount. Instead of paying more gas for each NFT you create, you can create several NFTs for the same gas cost as creating just one NFT with the regular ERC-721.

This incredible upgrade brings a significant reduction in gas costs, making it more affordable for creators to launch their projects and for users to participate in them. Imagine being able to save money on transaction fees while still unleashing your creative genius in the NFT world. ERC-721A opens the door to more accessibility, allowing more creators to shine and more users to explore and enjoy NFTs without breaking the bank.

However, it is only an effective solution in batch-minting scenarios. For example, in a situation where a team has to mint a whole bunch of non-fungible tokens then ERC-721A would be an excellent choice. But, if perhaps it was just buyers minting one or two tokens at a time then the creators wouldn't need to utilize ERC-721A.

ERC-721R (Trustless Refunds)

Like ERC-721A, this variation of the original ERC-721 standard **does one thing mainly. One major challenge within the NFT community is building trust between participants.  The NFT market is full of exciting, legitimate projects but like other spaces, there are malicious actors pumping out scams or worthless releases.

Thankfully, ERC-721R exists to address this. With this particular standard, it's possible to get a refund on your NFT purchase after some time. That's right, this token standard features a trustless refund mechanism. It’s like a security blanket or safety net for buyers as they can join a project and not worry about losing their money. If the project falls below their expectations, they can just get a refund.

This contributes to the overall health of the NFT industry. Creators have a greater incentive for honesty and are more likely to deliver on their promises. This in turn could help potential participants reduce their inhibitions about joining the space.

ERC-721 vs ERC-721A vs ERC-721R: A Comparison

Which is the best of the 3? Well, that comes down to what’s most important to you whether you’re approaching this as a creator or collector. Here’s a breakdown of what they all offer;

ERC-721

Pros: Widely trusted and established standards, compatible with existing platforms, and supported by a large ecosystem.

Cons: Higher gas fees compared to the other options, which can be costly for creators and users.

ERC-721A

Pros: Saves on gas fees, making it more cost-effective for creators and users, potentially increasing accessibility.

Cons: Less established compared to ERC-721, with fewer platforms supporting it.

ERC-721R

Pros: Offers trustless refunds, giving buyers peace of mind and building trust with creators.

Cons: Implementation of refund functionality can vary across projects, requiring careful integration.

Conclusion

Ultimately, the choice depends on the specific requirements and goals of the NFT project or what matters more to the buyer. If cost-effectiveness and reducing gas fees are a priority, ERC-721A could be a strong option. If building trust and providing buyer protection or avoiding risk is crucial, ERC-721R's trustless refund feature will definitely come in handy.

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