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In this article, we talk about the evolution of NFTs from the popular Ethereum token standards ERC-721 and ERC-1155 to the ongoing Ordinals NFT revolution on the Bitcoin blockchain. We expand upon upcoming NFT sector trends, such as soulbound tokens and smart contract NFTs, that are expected to have a significant impact on the sector.
You will also find a guide on how to build your own NFT collection, along with a price guide to help gauge the cost of a collection.
Types of NFT: Popular NFT Standards on Ethereum and Bitcoin
1. ERC-721
ERC-721 is an Ethereum token standard that is used to identify one-of-a-kind assets. Every ERC-721 token is unique and can have different values and properties than another token from the same smart contract.
ERC-721 token standard is generally used for 1 of 1 digital collectibles, artworks, photographs, and memberships. This token standard is the most popular one in the NFT industry. ERC-721 was Ethereum’s very first NFT token standard, pioneered by Dapper Labs’ play-to-earn ‘CryptoKitties’ NFT collection.
Today, blue-chip profile picture (PFP) NFTs like Bored Ape Yacht Club (BAYC), Cryptopunks, Azuki, and Clone X use the ERC-721 token standard.
2. ERC-721A
ERC-721A is a gas-efficient version of the original ERC-721 token. This token standard optimizes the ERC-721 standard by drastically lowering the fees for batch mints, where multiple tokens are minted in one transaction.
ERC-721A was developed by Chiru Labs – the creators of Azuki. Many NFT projects launching today use this standard over ERC-721, as it’s mostly the same but with significant improvements to batch minting efficiency.
3. ERC-721C
ERC-721C is a new token standard that enforces on-chain royalties. This token standard allows creators to choose which marketplaces to list their NFTs on and to block zero-royalty marketplaces.
When you create an NFT, you have the option to put a royalty clause into your NFT smart contract. By doing so, you will receive a small cut (typically less than 10%) for each sale made in the open market. However, NFT marketplaces like Blur and X2Y2 have designed their platforms to be “royalty-optional models” in their fight to attract more traders.
The non-enforcement of royalties prompted the creation of the ERC-721C token standard. The ERC-721C token standard was introduced by Limit Break, the creators of Digi Daigaku, in May 2023.
4. ERC-1155
ERC-1155 is a multi-token standard that developers can use to create a single contract to manage any combination of non-fungible and semi-fungible tokens. ERC-1155 also has gas-saving features such as batch transfer and batch approval.
Normally, token standards like ERC-721 (non-fungible) and ERC-20 (fungible) can’t be created using a single contract. The two standards have to be deployed using separate contracts for each token type. ERC-1155 token standard creates a smart contract interface that allows developers to manage non-fungible and fungible or semi-fungible tokens from the same contract.
These semi-fungible tokens are mostly the same but are slightly more differentiated from each other than regular, fungible ERC-20 tokens. They can transform from mostly fungible to non-fungible in their lifetime and are often used for 1-time use applications like event tickets.
ERC-1155 token standard is typically used in blockchain games where a gaming ecosystem has thousands of in-game items and several in-game currencies. ERC-1155 tokens are also known as semi-fungible tokens.
5. Ordinals
The first four NFT token standards that we talked about can be created on the Ethereum blockchain and on other EVM-compatible blockchains. Next, we will talk about the biggest development in the NFT sector in 2023: Ordinals.
Ordinals are inscriptions made on a satoshi – the lowest denomination of a bitcoin (BTC), with 100 million satoshis in one bitcoin. The process inscribes data such as an image, text, or video onto an individual satoshi so that it can be identified as unique and non-fungible.
These inscriptions enable the creation of NFTs on the Bitcoin blockchain. Ordinals are different from many Ethereum-based NFTs as the inscription data is stored on-chain, while Ethereum NFTs often store their content data on off-chain storage solutions like IPFS.
6. BRC-721E
BRC-721E is a token standard that allows Ethereum-based ERC-721 NFTs to migrate to the Bitcoin blockchain. BRC-721E was pioneered by Ordinals Market and Bitcoin Miladys NFT Collection.
The ERC-721 token is first burned before transferring the metadata over to the Bitcoin blockchain, which is inscribed on a satoshi.
NFT Trends: LV’s Rumored NFT Release, Ordinals Boom, and ERC-6551
Below are some of the most exciting trends in the NFT sector in 2023.
1. Bitcoin Welcomes NFTs
In early 2023, the crypto world saw a unique development as NFTs finally came to the Bitcoin blockchain. The impact of Bitcoin Ordinals was profound. Not only did NFTs become available on the oldest and most valuable blockchain in the world, but gas fees on Bitcoin spiked due to increased activity causing delight and distress to many users.
Critics vehemently oppose Bitcoin Ordinals for using the blockchain for non-payment-related purposes and for gas fee spikes. Supporters of Bitcoin Ordinals saw the increased network usage and elevated gas price as a good development for bitcoin miners – critical components of the blockchain.
At the time of writing, the Bitcoin NFT marketplace continues to flourish. Bitcoin is currently the seventh blockchain with the highest NFT sales volume despite only introducing NFTs to its blockchain in January 2023.
2. Soul-Bound Tokens (SBT)
What are soulbound tokens? A soulbound token is a token that cannot be transferred or sold (unless you sell your whole wallet).
The SBT concept was proposed by Ethereum co-founder Vitalik Buterin in a bid to make the NFT sector less “money-oriented.” SFTs have been proposed to be used as digital identity tokens that showcase achievements like university degrees, attendance proofs, etc. The use of SFTs has also been proposed to make decentralized autonomous organization (DAO) governance rights non-transferable.
The concept of SBTs is slowly growing. It was reported that luxury fashion brand Louis Vuitton (LV) will use soulbound NFTs to maintain its exclusivity and keep its products “hard-to-acquire”. According to Vogue Business, LV is planning to release an NFT collection that will grant owners access to future products and experiences.
The LV NFTs are expected to be soulbound so don’t expect to sell it for a profit.
3. ERC-6551
ERC-6551 is an Ethereum token standard released in 2023 that is expected to be a “game-changer” for the NFT industry. This token standard is essentially the opposite of soul-bound tokens. Instead of a wallet being permanently tied to an NFT, an ERC-6551 token is permanently tied to its own wallet. This gives NFTs the ability to own other tokens, including ERC-20 tokens as well as other NFTs.
The concept will be easier to grasp with an example.
Imagine an NFT that represents ownership of your video game character. You accumulate various in-game items via quests or purchases. Each in-game item is a standalone NFT that can be traded, bought, and sold individually. With ERC-6551, your video game character can become the “parent” NFT that owns all the NFTs representing the in-game items. The parent NFT can now be bought and sold as a package.
Now imagine the same packaging can be done to an NFT that represents an investment portfolio and its components or a single membership NFT that grants you access to various organizations.
ERC-6551 is made possible by giving every ERC-721 token smart contract capability. Each token will have a smart contract account that will allow a “parent” ERC-721 token to own those token-bound accounts.
How Do You Create An NFT?
Now that we have learned about the various NFT token standards and current NFT sector trends, here is a simple guide on how to make an NFT:
1. Choose the Type of NFT You Want to Create
Do you want to create profile picture NFTs? What about NFTs for a blockchain game? How about a membership NFT for your organization?
2. Choose the Blockchain For Your NFT Mint
Choosing the right blockchain is very important. Here are some points to ponder over when creating an NFT:
- Ethereum is the leading NFT marketplace, but it can be unfavorable due to high gas fees. Creating an NFT collection can be extremely expensive, especially if it’s complex
- Alternative Layer 1 networks such as Solana have low gas fees, but the network is not as popular as Ethereum.
- Some Layer 2 networks have burgeoning NFT scenes as well, including Polygon and Arbitrum, offering similarly low gas fees.
- Bitcoin Ordinals are unique but can be more difficult to create and do not support large file sizes.
- EVM-compatible token standards allow easy migration of NFTs between EVM-compatible chains
3. Choose a Token Standard
A PFP collection is typically minted using ERC-721 tokens, while gaming items use ERC-1155 token standards.
4. Set Up a Wallet
This wallet will be used to create and manage your NFT smart contract.
5. Choose a Platform and Method for Minting
Creators can use platforms such as Foundation, Zora, OpenSea, and Third Web to create NFT collections. This will make the process much faster but it may limit your possibilities. Of course, if you can’t code in Solidity or hire someone who can, these may be your only option, anyway.
You can choose to mint the entire NFT collection at one go and then put it up for sale on marketplaces like OpenSea and Blur.
You can also allow your customers to mint each NFT one by one on your custom mint site or through your partner platform.
6. Set Mint Price and Conditions
Select a price for your NFT mint and the percentage royalty you want from secondary sales. You can add multiple mint phases with different pricing, eligible addresses, and available items.
7. Secondary Sales
Once an NFT is minted, it will automatically be accessible on most general secondary NFT marketplaces. Learn how to buy, sell and create NFTs in detail here.
How Much Does It Cost to Create an NFT?
The cost to create an NFT collection will vary depending on the blockchain, token standard, mint conditions, upload data, and more. Note that each on-chain interaction, like a smart contract update to upload new files or change the mint price, will incur gas fees. A platform may also charge a marketplace fee on your NFT sales and on secondary sales.
The Bottom Line
At the time of writing, the NFT sector is not enjoying its best phase. The NFT sector is gripped by a severe bear market that has caused the price of several blue-chip collections to plunge. It’s struggling to bounce back after becoming oversaturated with hype and wild market speculation of the previous bull market.
It feels like only innovation and new real-life use cases for NFTs will help the market back up.
