ERC-6551: NFT-as-Wallet Brings a New Paradigm to SocialFi
ERC-6551 introduces NFT-as-Wallet which revolutionizes SocialFi.
Proposal ERC-6551 is a new token standard that greatly enhances the functionality of ERC-721 (i.e., NFT), which was released on the Ethereum mainnet on May 7, 2023: With ERC-6551, one or more smart contract wallets can be created for NFTs, making them more composable, dynamic, and interactive.
In today’s crypto world, more and more people are using NFTs as a form of on-chain identity. However, the current ERC-721 token (NFT) does not have proxy functionality or ownership of other on-chain assets, which is out of sync with the use cases of non-fungible assets in the real world. This is where the ERC-6551 proposal comes in. It solves this problem by granting full Ethereum account functionality to each NFT, while maintaining compatibility with existing ERC-721 contracts.
What is ERC-6551?
Proposal ERC-6551 is a new token standard that greatly enhances the functionality of ERC-721 (i.e., NFT), which was released on the Ethereum mainnet on May 7, 2023: With ERC-6551, one or more smart contract wallets can be created for NFTs, making them more composable, dynamic, and interactive. In short, ERC-6551 makes the NFT itself a wallet with an address.
These wallets are called “Token Bound Accounts” (TBA), and TBA control is delegated to the NFT holder, meaning that the NFT holder can use TBA to initiate on-chain operations. Using TBA, you can store any cryptographic asset in the NFT you own. For example, if you previously purchased BAYC, it would need to be stored in Metamusk; with ERC-6551, you would create a TBA to store it. In addition to ETH, other NFTs can also be stored in the TBA of BAYC. Additionally, as a “wallet,” TBA can also be used to interact with dApps. It is worth noting that a single NFT can also have multiple Token Bound Accounts through ERC-6551, so an NFT can now contain multiple wallets and more.
The system introduced by ERC-6551 consists of two main parts: an unlicensed registry for deploying token-bound accounts and a standard interface for interacting with these accounts. The following diagram illustrates the relationship between ERC-721 tokens, ERC-721 token owners, Token Bound Accounts (TBA), and registries:
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Changes brought by ERC-6551
Through the ERC-6551 standard, users can do anything with NFT that can be done with a regular Ethereum wallet. Users can bundle their relevant assets (NFTs, tokens, identity features, etc.) into an NFT to more easily manage and transfer their assets across different platforms. If an NFT is sold/transferred, all the assets within it will also be transferred. TBA solves the problem that NFTs currently cannot provide detailed information such as source/origin/history of transactions, which buyers usually cannot directly obtain except for some NFT markets displaying simple information. NFT markets and lending protocols can use TBA to determine user credibility, simplify some processes, and so on.
TBA also brings a new paradigm of decentralized identity. Before TBA, Vitalik proposed SBT (Soul-Binding Token), which confirmed identity by using wallet assets, while TBA does not need to verify identity, it is not to bind NFT to the wallet, but to bind the wallet to NFT. This attribute turns NFTs from static assets into a flow asset management system. This means that one of your NFTs may become your on-chain identity, and it can prove your credibility through TBA’s successful transaction records. TBA’s NFTs can interact directly with dApps, in GameFi and SocialFi, users can easily identify asset identity through NFT, greatly reducing the cost of proving rights, and can be widely used in airdrops, loyalty programs, and in-game rewards.
New help for breaking the circle of SocialFi
The continuous development of NFTs has enabled SocialFi to truly surface. The social interaction in the Web3 world is inevitable, and how to integrate Web3 social interaction into the decentralized economic system has always been explored by many teams. The innovation of ERC-6551 will directly bring better help to the SocialFi track.
Let’s take a look at the characteristics of SocialFi. The core narrative of SocialFi is Web3 social interaction, and Web3 social interaction has three decisive characteristics compared to Web2:
First, it is platform-free. Without a platform, there is no third party that owns the content created by users. On the contrary, the creator is also the owner. In addition, Web3 social networks also have anti-censorship, which means that social relationships cannot be deleted or restricted by platforms.
Secondly, Web3 social data is portable. However, Web3 has one advantage: it uses a wallet, which allows for a direct relationship between users and creators, so creators do not have to constantly rebuild their fan base; even if individual social protocols are closed, the wallet still exists. The end result is that neither fans nor creators will be tied to a particular platform. Compared to building an audience on Web2 every time, and then constantly building new audiences and losing contact with them due to platform reasons, Web3 social interaction does not have this problem.
Thirdly, Web3 social has strong composability. SocialFi protocols gain value and utility by building applications on top of decentralized social primitives. The early atmosphere of Web2 and today’s Web3 are quite similar: the platform is not the subject, but rather the creators and other users. However, over time, Web2 platforms typically evolved from collaborating with builders to competing with them. Web3 networks are more favorable to compositionality because they have been optimized for collaboration and have Tokens as decentralized incentives.
The rapid and low-cost verification mechanism of TBA can greatly solve the trust mechanism and transaction costs of Web3, and SocialFi can more conveniently convert Web2 users into the Web3 world. In this way, TBA enables project creators to achieve new use cases they have always wanted to add but have not found a simple way to do so:
Equip digital clothing and items (RTFKT – CloneX, Doodles)
ERC-20 token earning/airdrop model (BAYC, Cool Cats, SupDucks)
POAP or badge earned through participation (Azuki, FWB, Moonbirds)
Trade the entire collection as a unit (OpenSea batch transfer)
NFT as a chain identity with the ability to layer on social network models (CryptoPunks, Nouns)
These use cases can all become new forces for SocialFi to break through.