If you are a crypto enthusiast you must have heard the term token and specifically ERC-20 token a lot of the time. For a common layman, the token is equivalent to store value, like the BTC token has a value of around $3,416 currently. However, the actual meaning of token is completely different in the crypto space.
A token is basically a contract interface which contains certain information of the owner and who it can be transferred to and what it can be exchanged against. There is no store value of its own as many of you might think. So, to make it easier, remember token as a form of contract, with no value of its own.
This article would help you understand what tokens are and what exactly the ERC-721 token does.
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ERC-721 Token and How it is Different From Previous Token Protocols
ERC-721 token also known as Non-fungible tokens (NFT) is a unique Ethereum based token which allows to tokenize any asset class with specific customization. Each ERC-721 token is unique in its way as it can be programmed to hold a specific value, rather than a common value in case of ERC20 tokens.
To understand the difference better, let us take ERC 20 token into consideration, these tokens are interchangeable and hold a predefined value set by a common contract. What it means is developers can define common working criteria and produce any number of tokens. In the case of ERC-721, each token acts as a unique identifier and holds a specific different value.
Let us take a real-world example, consider ERC-tokens as a fiat currency bill, where the government has a pre-defined the value of $1, and what can be brought against the $1 bill. Now the government can produce any number of $1 bill and does not worry about defining the value of each.
Now imagine ERC-721 tokens as your car, now we all know what cars are but there are specific identifiers which allow you to differentiate between your car and the other car. If you lose a $1 bill, any other $1 bill as a replacement will be as good, however, if you own a Ferrari and someone comes up with a Toyota, it won’t be the same thing right?
That is how ERC-721 token is different from the ERC-20 token, where a common standard is set and based on those any number of ERC20 token can be produced and one can be interchanged against the other. While each ERC-721 token is unique and cannot be interchanged with the other.
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ERC-721 is More Advanced Token
Ethereum blockchain is a complete ecosystem rather than just being another cryptocurrency on the trade market. The network acts as a platform for other new entrants and helps them in creating their token. Now the new ERC-721 token which was launched towards the end of 2017 promises to be more advanced, customizable and can help in tokenization any asset class.
The token can help the Ethereum network to expand its portfolio into tokenizing different real-world assets which have not been the case up until now.
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ERC 721 tokens bring in a lot to the table and might help in expanding the open finances also known as decentralized finances to new heights. The market of decentralized fiances has already seen new heights and currently has a market value of $10 billion with an addition of around $3.5 billion in 2018.
Hopefully, the new advanced and non-fungible ERC-721 token can also help the Ethereum network to establish itself as the most preferred platform for tokenization real-world asset class.
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