The digital world has transformed how we think about ownership and assets. Non-Fungible Tokens (NFTs) have emerged as revolutionary tools for representing unique digital items on blockchain networks. However, behind every NFT lies a complex framework of technical standards that make this digital ownership possible.

Before diving into NFT token standards, it’s important to understand what makes these digital assets work. Think of NFTs as digital certificates of authenticity stored on a blockchain. Unlike cryptocurrencies such as Bitcoin or Ethereum, where each unit is identical and interchangeable, NFTs are unique. Each token carries distinct information that separates it from any other token. This uniqueness is what makes them perfect for representing digital art, collectibles, virtual real estate, and gaming assets.

The magic behind NFTs isn’t just blockchain technology—it’s the standardized protocols that ensure these tokens can be created, transferred, and recognized across different platforms. Therefore, understanding NFT token standards becomes essential for anyone looking to create, trade, or build applications around these digital assets. These standards act as universal languages that wallets, marketplaces, and applications use to interact with NFTs seamlessly.

ERC-721 Standard: Unique Token Implementation and Ownership Transfer

The ERC-721 standard stands as the pioneering NFT token standard that started the entire NFT revolution. Introduced in 2017, this Ethereum-based protocol established the foundation for creating non-fungible tokens on the blockchain.

At its core, ERC-721 defines a minimum interface that smart contracts must implement. Consequently, any token following this standard can be recognized and handled by compatible wallets and marketplaces. The standard ensures each token has a unique identifier (tokenID) that distinguishes it from every other token in the contract.

Key features of ERC-721 include:

• Unique token identification through distinct tokenIDs
• Ownership tracking that records which wallet address owns each token
• Transfer functions that enable safe movement of tokens between addresses
• Approval mechanisms allowing third parties to transfer tokens on behalf of owners

The ownership transfer process in ERC-721 is straightforward yet secure. When you want to send an NFT to someone, the smart contract verifies you own the token, then updates the ownership record on the blockchain. Moreover, the standard includes safety checks to prevent tokens from being sent to addresses that can’t handle them.

The safeTransferFrom function exemplifies this careful design. Unlike simple transfers, it checks whether the receiving address is a smart contract. If so, it verifies that contract can properly receive NFTs. This prevents tokens from getting permanently stuck in incompatible contracts.

Popular implementations like CryptoKitties and Bored Ape Yacht Club rely on this standard. Additionally, ERC-721 provides optional metadata extensions. These allow creators to attach additional information like names, descriptions, and images to their tokens. The metadata typically links to JSON files stored off-chain, containing rich details about the NFT.

ERC-1155 Standard: Multi-token Standard and Batch Operations

While ERC-721 works perfectly for unique items, it becomes inefficient when dealing with multiple token types. Enter the ERC-1155 standard—a revolutionary NFT token standard that handles both fungible and non-fungible tokens within a single contract.

Developed by Enjin, ERC-1155 addresses several limitations of earlier standards. Instead of deploying separate contracts for each token type, a single ERC-1155 contract can manage an unlimited number of token types. This design dramatically reduces gas costs and simplifies smart contract management.

The standard introduces powerful batch operations. For instance, you can transfer multiple different tokens to multiple recipients in a single transaction. Previously, this would require numerous separate transactions, each consuming gas fees. Therefore, ERC-1155 makes blockchain interactions significantly more cost-effective.

Notable advantages of ERC-1155:

• Reduced deployment costs through shared contract infrastructure
• Batch transfer capabilities saving transaction fees
• Flexibility to create both unique and identical tokens
• Atomic swap functionality for trading multiple tokens simultaneously

Gaming applications particularly benefit from this standard. Imagine a blockchain game with weapons, armor, potions, and unique character skins. With ERC-1155, all these items exist in one contract. Common items like health potions can be fungible (identical), while rare items remain non-fungible (unique).

The balance tracking differs from ERC-721 as well. Instead of tracking individual token ownership, ERC-1155 tracks how many of each token type an address holds. This approach works seamlessly for both fungible quantities and unique items (where the quantity is simply one).

Furthermore, the standard includes built-in safe transfer callbacks and supports complex approval patterns. Marketplaces can operate on behalf of users more efficiently. The metadata URI system also allows for dynamic updates, making it easier to reveal NFT characteristics over time.

Metadata Standards: JSON Schema, IPFS Storage, and Off-chain Data

NFT token standards wouldn’t mean much without proper metadata implementation. The visual artwork, attributes, and descriptions you see when viewing an NFT all come from metadata—structured information stored separately from the blockchain token itself.

The industry has converged on JSON as the standard format for NFT metadata. A typical metadata file contains specific fields that wallets and marketplaces expect to find. The basic JSON schema includes properties like name, description, image URL, and various attributes that describe the token’s characteristics.

Here’s what a standard metadata structure looks like:

• name: The title of the NFT
• description: A detailed explanation of what the token represents
• image: A URL pointing to the visual representation
• attributes: An array of properties defining specific traits

Storage location matters significantly for NFT metadata. While storing everything on-chain seems ideal, it’s prohibitively expensive. Instead, most projects store metadata off-chain while keeping a reference on-chain. This is where IPFS (InterPlanetary File System) becomes crucial.

IPFS provides decentralized storage that aligns with blockchain’s philosophical principles. Unlike traditional web hosting where files live at specific server locations, IPFS uses content addressing. Each file gets a unique hash based on its content. Therefore, the same file always produces the same hash, making tampering immediately detectable.

When you create an NFT, the metadata JSON file typically gets uploaded to IPFS first. The resulting IPFS hash then gets encoded in the token’s URI. This approach offers several benefits. First, the metadata remains permanently accessible as long as at least one IPFS node hosts it. Second, anyone can verify the metadata hasn’t changed by checking its hash.

However, IPFS isn’t without considerations. Files need “pinning” to ensure they remain available. Many projects use pinning services like Pinata or nft.storage to guarantee their metadata stays accessible. Alternatively, some projects use centralized servers initially, planning to migrate to decentralized storage later.

The token URI function in smart contracts returns the metadata location. Some implementations use a base URI combined with the token ID, while others store unique URIs for each token. This flexibility allows projects to choose between revealed and unrevealed metadata strategies.

Royalty Mechanisms: EIP-2981 and Creator Fee Implementation

Creator royalties represent one of NFT technology’s most transformative features. Unlike traditional art sales where creators only profit once, NFT token standards can encode perpetual royalties into the token itself. This ensures creators receive a percentage of every subsequent sale.

EIP-2981 emerged as the standardized royalty implementation. This Ethereum Improvement Proposal defines a simple interface for retrieving royalty payment information. When a marketplace facilitates an NFT sale, it can query the token contract to determine how much royalty to pay and where to send it.

The standard works elegantly. The NFT contract implements a royaltyInfo function that accepts a token ID and sale price. It returns two pieces of information: the recipient address for royalties and the amount to pay. Marketplaces call this function, then honor the returned values by sending the appropriate payment.

Implementation considerations include:

• Setting royalty percentages (commonly 5-10% of sale price)
• Defining recipient addresses that receive payments
• Handling multiple creators through split payments
• Updating royalty information when necessary

Nevertheless, royalty enforcement faces challenges. EIP-2981 is ultimately optional—marketplaces must choose to honor it. Recently, some major platforms have made royalties optional or eliminated them entirely. This sparked intense debate within the NFT community about creator rights versus buyer freedom.

Some projects have attempted on-chain royalty enforcement. These implementations try to prevent transfers unless royalties are paid. However, such approaches often conflict with the composability and openness that makes NFTs valuable. Moreover, they can be circumvented through peer-to-peer transfers or wrapping mechanisms.

Despite these challenges, many marketplaces still respect creator royalties. OpenSea, for example, maintained royalty support while giving creators flexibility in enforcement. The industry continues exploring solutions like creator fees built into smart contract logic or community-driven standards that incentivize royalty respect.

Looking ahead, the conversation around royalties continues evolving. Some newer standards propose more sophisticated royalty splitting mechanisms. Others explore dynamic royalties that change based on conditions. The key remains balancing creator compensation with market liquidity and user freedom.

FAQs:

1. What’s the main difference between ERC-721 and ERC-1155?
   ERC-721 creates individual unique tokens with separate contracts, while ERC-1155 manages multiple token types (both fungible and non-fungible) within a single contract. ERC-1155 also supports batch operations, making it more gas-efficient for projects with multiple token types.
2. Why is NFT metadata stored off-chain instead of on the blockchain?
   Storing large files like images and detailed metadata directly on-chain is extremely expensive due to gas costs. Off-chain storage using solutions like IPFS keeps costs manageable while maintaining decentralization and data integrity through content addressing.
3. Can NFT royalties be enforced automatically?
   Not entirely. While EIP-2981 provides a standard for declaring royalty information, enforcement depends on marketplaces choosing to honor these royalties. On-chain enforcement attempts exist but often face technical limitations and can be circumvented.
4. What happens if IPFS metadata becomes unavailable?
   If no IPFS nodes continue hosting the metadata file, it becomes inaccessible. This is why many projects use pinning services to ensure their metadata remains permanently available. Some projects also maintain backup storage on centralized servers.
5. Can you change NFT metadata after minting?
   This depends on the smart contract implementation. Some contracts use immutable metadata links, while others allow the contract owner to update metadata URIs. Projects should clearly communicate their metadata update policies to maintain trust with collectors.