What is the ERC-1155 Protocol?
What is the ERC-1155 Protocol?
The ERC-721 protocol for token development was groundbreaking because it enabled users to create non-fungible, or unique, tokens for the first time. ERC-20 tokens are fungible, meaning that all tokens are equivalent to each other, without distinction. The advent of ERC-721 tokens enabled the creation of collectibles that could be exchanged, like in beloved game CryptoKitties. ERC-721 has many practical future applications, including parceling land for investment.
However, the protocol’s benefits are available only at the cost of efficiency and scaling. ERC-721 occupies significant amounts of bytecode, or storage space, on Ethereum’s blockchain. For blockchains with ambitions to handle millions of transactions per second, smart contract storage issues translate to scaling issues. They can also make transactions on Ethereum’s blockchain expensive by increasing gas costs, with gas being the amount of Ether required to conduct a transaction. A transaction with insufficient amounts of Ether is generally not executed.
What is new about ERC-1155?
ERC-1155 is a new protocol that claims to solve the problems associated with ERC-721. The protocol was developed by Widek Radomski from Enjin Games, a company that builds blockchain games. It was released on June 17, 2018.
The initial inspiration for the protocol was the development of game platforms. Tokens are especially important within such platforms. While ERC-721 tokens enable the development of unique gaming artifacts, ERC-20 tokens enable economies within these systems by acting as a medium of exchange for goods and services. But the current gaming ecosystem is populated with different types of tokens. Each gaming platform has a different token, leading to expensive storage space and transaction costs on Ethereum’s blockchain.
ERC-1155 batches transactions together to speed up processing time. It allows code for fungible as well as non-fungible tokens to reside together in the same smart contract instead of separately. As Radomski explained it, the core concept behind ERC-1155 is that a “single smart contract can govern an infinite number of tokens.” Radomski refers to it as a “multi-token standard.”
The ERC-1155 protocol also saves overall costs associated with each transaction. We know already that each transaction incurs gas costs. Separate smart contracts containing individual token types require separate gas costs that multiply over time. By bundling multiple tokens into a single contract, ERC-1155 significantly reduces the price associated with conducting transactions.
Given its functionality, ERC-1155 has expanded the utility of the token ecosystem. Specifically, one of its applications relates to atomic swaps. Atomic swaps enable fungibility of tokens, meaning one type of token can be exchanged for another token on another blockchain.
In effect, this means that swaps between multiple token types can theoretically be made possible using ERC-1155. This functionality, at least between tokens, is present very sparingly and is difficult to execute.
Another use case for ERC-1155 is escrow capabilities for different types of tokens within a single contract. Most smart contracts have escrow capabilities in which the escrowed funds are released only after certain criteria are met. But escrow facilities are available only for identical tokens, meaning that if the funds escrowed are for a specific token then they are released only for that token type. ERC-1155 expands use cases by enabling escrow between multiple token types.