In the previous bear market cycle, the question in people’s minds was “whether blockchain is useful at all”? Then we witnessed the power of Uniswap, along with the flourishing vitality of decentralized finance (DeFi). The question was answered.
Amelie Hua is a freelance writer and independent researcher.
During the current market cycle many are again faced with a similar question. People ask this not out of dissatisfaction, but because it’s not always apparent what crypto is good for.
The answer won’t come from new blockchains or scaling layers. It will come from applications, particularly under new standards and protocols than old ones. Given the innovation seen over the past few years, old protocols haven’t brought any surprises.
ERC-6551, ERC-5169 and ERC-404 token standards are new protocols that will open up new applications, and new applications may bring users to the blockchain with non-investment and non-financial needs — perhaps providing a more satisfying answer for what crypto is good for.
ERC-6551
ERC-6551 is a token standard introduced on the Ethereum mainnet on May 7, 2023 that assigns Ethereum accounts to non-fungible tokens. These token-bound accounts allow NFTs to own assets and interact with applications. It may not be apparent why this is important, but it offers a vast space for innovation. This article only explores the direction that personally interests me, which I call “non-human account entities.” The three most viable situations are gaming, artificial intelligence (AI) and digital IDs.
See also: What Is ERC-6551? Unpacking The ‘Backpack’ Wallet
Gaming: The integration of real players and NPCs
“Kenshi” is an open-ended game I enjoy. Players can trade goods between different cities to earn money, but the desert between cities is dangerous. In such situations, players can go to a tavern, hire mercenaries and pay NPCs [non-playable characters] to escort the caravan. In traditional games, these NPCs are not real people, but part of the game itself. Because they are not real people, everything in the game, except the players, has no growth potential. Eventually, the real players will complete all tasks and leave the game.
What if there was a new type of entity or object that could both embody real people and NPCs? When a real person logs in, they enter real player mode, and improve their skills. When a real person logs out, they enter NPC mode (reading fixed data and executing specific programs), passively earning money as an NPC in the real player mode by playing the game on their behalf, such as when hired as a mercenary.
ERC-6551 tokens could serve as the best carrier for this type of entity in gaming. NFTs (game characters) have accounts, data and persistent properties, allowing them to be treated as independent objects. Real player accounts have NFTs, enabling them to take control when they log in.
It doesn’t mean ERC-6551s solve all the problems related to perpetual gaming, but they open up a possible path. As a hardcore gamer, I often ask myself, “Can blockchain make games more fun?” Playing as an NPC is an answer that has not yet been crossed out.
AI: Equality between AI and humans
Depending on whether you see technology as an evolutionary process, you might consider AI as an entity equal to humans — either today or in the future. So, where would AI live? Will they place themselves on a private server controlled by others? How should they manage and use their assets?
The answer might be: A blockchain where digital entities have accounts via ERC-6551 tokens.
Digitization: A digital version of yourself
With data collection and AI training, generating a somewhat similar version of oneself in the digital space is no longer a distant possibility. This digital representation can be trained to act and respond like you online. One day, users may even want to give this digital avatar persistence and perhaps even a physical, robotic body.
Will this digital avatar be considered as an entity equal to humans? Will it mean we can outlast our meatspace bodies? The maintenance of the “life” of this digital avatar is a challenge, especially after the prototype, so to speak, passes away. Entrusting our digital avatars to others, including family, to control is unreliable due to the extended time frames involved. The best strategy is to provide it with sufficient funds to sustain itself.
In this case, it needs a permanent account (an account that cannot be closed) and assets that can be autonomously managed. What solutions can you think of? How can it achieve independence, or in other words, how can the digital avatar have ultimate control over itself?
ERC-6551 is one potential answer. These token accounts are a vessel for independent digital entities, whether that entity is a game character, an independent AI or a person’s “digital avatar.”
ERC-5169
ERC-5169 is an Ethereum standard that allows tokens to carry executable scripts. With this token standard, developers can explore applications where some data is processed on-chain and some off-chain. They can explore applications where user rights are safeguarded by a combination of trustlessness and other, off-chain forms of trust. It was an idea first introduced in May 2022.
There is a vast space between data that absolutely needs to be processed by the blockchain and data that doesn’t need blockchain processing at all. Applications in this space can have some of their data processed by the blockchain to leverage the benefits of decentralization, while maintaining the possibility of processed other data off-chain to gain advantages in centralized handling. Today, the boundaries of this space are the upper-limits of blockchain capabilities.
See also: After Co-Founding Salesforce’s Web3 Studio, Mathew Sweezey Is Bullish on Smart Tokens
Trustlessness may be the greatest allure of blockchain, but achieving trustlessness is a challenging task. We often deceive ourselves, equating decentralization with trustlessness. In reality, some things require trustlessness, and others require other forms of coming to consensus.
ERC-5169 is token-centric programming, meaning both on-chain and off-chain data — or trustlessness and other forms of trust — are anchored to a particular token. This expands blockchain’s interoperability and composability — a revolutionary innovation for the industry that would allow blockchains to integrate with far more areas of the world.
In other words these highly interactive tokens would be able to interact with any number of Web2 and Web3 services — like controlling a smart fridge with a smart contract, perhaps bringing the internet-of-things one step closer to reality.
ERC-404
The experimental ERC-404 Ethereum token developed recently by pseudonymous creators “ctrl” and “Acme” is meant to blend the characteristics of fungible (ERC-20) and non-fungible tokens (ERC-721).
A good friend of mine convinced me to pay attention to ERC-404 standard with a simple statement: “Trading blind boxes won’t last; but trading wine will.” Using ERC-721, the token standard behind many NFTs, can produce products similar to “blind boxes,” in that the total quantity is fixed, and the project team assigns attributes to each product, determining the scarcity of each product by controlling the rarity of the attributes.
See also: Ethereum Has Gatekeepers (for Good Reason)
Instead, using ERC-404 can produce products similar to “wine,” an object beloved across human history because of its actual attributes, scarcity and provenance as well as ability to be shared.
The difference between “wine” and “blind boxes” lies in the fact that wine is produced in a standardized and sustainable manner, and a Lafite Rothschild has value not just because the wine is scarcely produced, but because there’s consensus that it is valuable.
ERC-404 tokens are a product production machine where the input is data (the production materials of making fine wine), such as block height and random numbers, produces an output that is a product that can be sold or used (the wine itself). Think something along the lines of generative art, which is the output of hardcoded algorithms that spin out images that many people value.
With these token designs, we don’t need to intervene in the production process because there is a standardized, automated process. Likewise, we don’t need to define scarcity because the public decides what is rare.
Here’s the real implication: Only when a type of product can be produced in a standardized manner can it potentially be widely adopted; and only when scarcity comes from consensus can it be sustainable.
New standards
New standards/protocols bring new forces, and new technologies and scenarios create additional new conditions for unleashing this force.
Taking ERC-6551 as an example, it can be combined with many new technologies, including intent-centric and account abstraction. It can be applied to various new scenarios, such as autonomous worlds and AI.
The applications of ERC-6551 are mostly about creating new demands, while ERC-5169’s applications are about providing new solutions to real-world problems and ERC-404 offers a whole new design space.
When we discuss the value of various new standards/protocols, we’re essentially talking about the new plays or new projects that will emerge. There’s a lot to imagine, and hopefully these new plays or new projects may break the deadlock in blockchain.