A bright future for non-fungible tokens in blockchain world. Last January we have seen a new phenomenon in cryptocurrency world: crypto kitties. Everyone in blockchain world would like to buy one, but Kitties was important not only for their popularity but even more for their technology, which started a new kind of token. We will see what a non-fungible token is, its standard ERC721 and its bright future and infinite applications they could have in blockchain world.

1. BLOCKCHAIN & CRYPTO VALUES CONF | June 14 - Milan
Title: From Crypto Kitties to non fungible token to ERC721 standard
Author: Stefano Maestri

2. Who is Stefano?
● An enthusiast open source developer
● Red Hat Principal software engineer and associate manager
● https://www.linkedin.com/in/maeste/
● https://twitter.com/maeste
● https://github.com/maeste/
● http://www.onchain.it/
My matching pairs game: Java & JBoss, Open Source & Red Hat,
Blockchain & Ethereum
2

3. https://milan2018.blockchaina
ndcryptovalues.com/

4. Today’s Agenda
● Brief introduction to (fungible) token concepts in
blockchain world
● Cripto Kitties and collectable token
● ERC-721 Non Fungible Token: concepts, use cases and
potentials
● ERC-998 and other possible extension
● The importance of standards in emerging technologies
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5. What’s a (Fungible) Token?
Blockchains have a native coin/token that the chain is built with.
These coins/tokens are required to execute transactions, send data, are rewards for mining, etc.
But it may be possible to encode additional metadata in the chain which represents a token. Depending on the chain, this can be easy or
hard
Basically token could represent any asset you could count or portion, define ownership and/or transfer
right.
BitCoin: Colored Coins https://en.bitcoin.it/wiki/Colored_Coins
Ethereum: Tokens are defined by Smart Contract https://etherscan.io/tokens - 34,000+ ERC20 tokens on the ethereum chain.
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6. Why we need tokens?
Tokens can represent any asset:
● An hours worth of rooftop solar energy (utility token)
● A currency such as dollar or even a company share (security token)
● A promise for a product in a crowdfund...ICOs (utility/security token)
● A future download of a song from your favorite artist (utility token)
It’s something we are used in real world…..
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7. Why we need tokens?
Tokens can represent any asset:
● An hours worth of rooftop solar energy (utility token)
● A currency such as dollar or even a company share (security token)
● A promise for a product in a crowdfund (utility/security token)
● A future download of a song from your favorite artist (utility token)
It’s something we are used in real world…..
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8. How (fungible) tokens can be used?
Basically they could be used for some special purpose in their Dapp:
● Internal currency
● Right to vote
● Right to use some resources
● Anything it’s pure “counting”
Can be exchanged on the market
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9. Fungibility definition
Wikipedia: In economics, fungibility is the property of a good or a commodity
whose individual units are essentially interchangeable.
For example, one kilogram of pure gold is equivalent to any other kilogram of
pure gold
ECR-20 standard Ethereum Tokens is fungible. IOW the only things that matter is
how many token of a certain type you own.
Until November 2017 every ethereum token was fungible, every different use
case was modeled with dedicated smart contracts
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10. ERC-20 standard
● ERC == RFC in ethereum governance (Ethereum Request for Comment)
● One of the most famous and used standard in Ethereum world
● Its main use cases are Dapp coins, used as utilities or securities, and made
famous because of ICOs
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11. ERC-20 standard (interface code)
// ----------------------------------------------------------------------------
// ERC Token Standard #20 Interface
// https://github.com/ethereum/EIPs/blob/master/EIPS/eip-20-token-standard.md
// ----------------------------------------------------------------------------
contract ERC20Interface {
function totalSupply() public constant returns (uint);
function balanceOf(address tokenOwner) public constant returns (uint balance);
function allowance(address tokenOwner, address spender) public constant returns (uint remaining);
function transfer(address to, uint tokens) public returns (bool success);
function approve(address spender, uint tokens) public returns (bool success);
function transferFrom(address from, address to, uint tokens) public returns (bool success);
event Transfer(address indexed from, address indexed to, uint tokens);
event Approval(address indexed tokenOwner, address indexed spender, uint tokens);
}
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12. What happened last November?
12

13. What happened last January?
13

14. What is criptokitties?
Collectible.
Breedable.
Adorable.
CryptoKitties is a game centered around breedable, collectible, and
oh-so-adorable creatures we call CryptoKitties! Each cat is one-of-a-kind
and 100% owned by you; it cannot be replicated, taken away, or
destroyed.
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15. What’s new?
● The first game on blockchain technology
● It’s a new kind of token (they called collectible in the beginning, now we call
them Non Fungible)
● They are adorable...everyone want one of them (even “La Pina” famous
radio deejay speaker :) )
● They are unique and you can exchange them giving value for their specific
characteristics. Rarer ones got more value
● You can breed new ones….maybe the most rare one!
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16. What’s new?
● The first game on blockchain technology
● It’s a new kind of token (they called collectible in the
beginning, now we call them Non Fungible)
● They are adorable...everyone want one of them (even “La Pina” famous radio deejay speaker :) )
● They are unique and you can exchange them giving value for their specific characteristics. Rarer
ones got more value
● You can breed new ones….maybe the most rare one!
16

17. Tokens (fungible or not) are smart contracts
With the present implementations] "smart contract" is general purpose
computation that takes place on a blockchain
Token contracts are special smart contracts (respecting a standard) storing in
blockchain metadatas, balance and ownership for the token itself.
Token smart contracts could other functions doing “something” with or to the
token itself. For example: “use” token to give right to vote, “use” token in a game
to attack/defend etc. etc.
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18. Fungible vs NonFungible Tokens
Fungible
● Every token is equal to each other
● Can be fractioned/aggregated (100 cents
== 1 Dollar)
● Only the balance is registered in
blockchain
● You could think it as pure counter of
primitive (integer) type.
Non Fungible
● Every token is unique
● Cannot be fractioned
● Blockchain register ID, ownership, and
metadatas
● You could think it as an indexed list of
complex type (struct or object)
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19. Why NFC matters?
Non Fungible token has unique IDs and may have unique metadatas associated.
Smart contracts could change metadatas in reaction of some function, or smart
contract functions using NFC could have different behaviour based on NFC
metadata.
IOW every NFC could be considered an instance of structured datas, with an
owner and maybe a specific lifecycle.
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20. Fungible and NonFungible in real life
Fungible!
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21. Fungible and NonFungible examples
Fungible!
21

22. Fungible and NonFungible examples
Fungible!
22

23. Fungible and NonFungible examples
NON Fungible!
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24. Fungible and NonFungible examples
NON Fungible!
24

25. Fungible and NonFungible in real life
Non Fungible!
25

26. Fungible and NonFungible examples
Fungible...or not?
26

27. Fungible and NonFungible in real life
Fungible!
27

28. Fungible and NonFungible in real life
Non Fungible!
28

29. Fungible and NonFungible in real life
Non Fungible!
29

30. Fungible and NonFungible in real life
Fungible!
Or better a non fungible
Made fungible by convention
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31. Fungible and NonFungible in real life
Non Fungible!
Composed!
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32. Fungible and NonFungible in real life
Non Fungible!
32

33. Fungible and NonFungible in real life
Fungible!
Mintable only by
Non fungible owner
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34. ERC721 standard
Since the beginning of 2018 a lot of other Dapp based on the concept of NFC
(mainly games, but not only) started to show up.
Ethereum community did a big effort to define a new standard for NFC,
permitting better interoperability maily for wallets and exchange
There was a rich and animated discussion on ERC’s github
https://github.com/ethereum/EIPs/issues/721
https://github.com/ethereum/EIPs/pull/841
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35. ERC721 standard (interface code)
You can see the results of that discussion here (Status: official draft):
https://github.com/ethereum/EIPs/blob/master/EIPS/eip-721.md
http://erc721.org/
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36. ERC721 use cases
● Collectible
● Gaming
● Real Estate
● Art
● License management
● Patents
● Finance products: (personalized) derivative
● Advanced notarization
36

37. ERC721 potentials
If you think real world there is much less cases for fungible than non-fungible
Every ownership contract could be modeled as NFC, while only coin like situation
fit Fungible token.
Many cases solved by dedicated smart contract instances could be modeled as
NFC, giving the opportunity to buy NFCs taking over the contract
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38. ERC998 Composable NFC
A standard extension for any non-fungible token (NFT) to own another non-fungible
ERC-721 token or fungible ERC-20 tokens. Transferring the token composition means
transferring the entire hierarchy of items. Virtual assets can own their own assets.
https://medium.com/coinmonks/introducing-crypto-composables-ee5701fde217
https://medium.com/coinmonks/crypto-composables-erc-998-update-1cc437c13664
https://github.com/ethereum/EIPs/issues/998#issuecomment-381563361
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39. ERC998 use cases
● Compose/decompose ERC721 token
● Assets portfolio
● Complex supply chain provenance
● Collection of collectible
● Membership and ACL management
● Stakes
39

40. ERC721/998 future and potentials
● Mint Token (fungible or not) from an NFT
● Rent/temporary right to use
● Credit management
○ Loan guarantee
○ sales of the loan
● Multi signature ownership instead of multisignature wallets
● State channels/side chains stakes
Everything apply also to composable NFT...
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41. Importance of standards in emerging
technologies
What is a “Standard”? A simplistic but idealized working definition…
Standard is a document, developed and used by consensus of the stakeholders, which describes how
a product is to be obtained or used.
● document - can be electronic or paper
● stakeholders – includes anyone with an interest without restriction
● product - can include hardware, software, analysis result, test result, protocol, definition, etc.
● obtained or used - can mean designed, built, procured, calculated, tested, etc.
41

42. Importance of standards in emerging
technologies
● In (emerging) technologies standards acts as common, accepted and verified building blocks for
complex application
● Using standards your product will be able to interoperate with existing and future products in the a
specific environment/technology ecosystem
● A deep knowledge of existing standards helps a lot thinking new application composing complex
solution based on them
● An open mindset about standards helps in defining new ones starting from your concrete
implementation, guarantee better interoperability an enrich the technology ecosystem you are
developing in.
● Standards doesn’t limit creativity...they expand it
IOW using and defining new standards will make everything easier getting greater results
42

43. Importance of standards in emerging
technologies
● In (emerging) technologies standards acts as common, accepted and verified building blocks for
complex application
● Using standards your product will be able to interoperate with existing and future products in the a
specific environment/technology ecosystem
● A deep knowledge of existing standards helps a lot thinking new application composing complex
solution based on them
● An open mindset about standards helps in defining new ones starting from your concrete
implementation, guarantee better interoperability an enrich the technology ecosystem you are
developing in.
IOW using and defining new standards will make everything easier getting greater res
43

44. Importance of standards in emerging
technologies
● In (emerging) technologies standards acts as common, accepted and verified building blocks for
complex application
● Using standards your product will be able to interoperate with existing and future products in the a
specific environment/technology ecosystem
● A deep knowledge of existing standards helps a lot thinking new application composing complex
solution based on them
● An open mindset about standards helps in defining new ones starting from your concrete
implementation, guarantee better interoperability an enrich the technology ecosystem you are
developing in.
IOW using and defining new standards will make everything easier getting greater res
44

45. Importance of standards in emerging
technologies
● In (emerging) technologies standards acts as common, accepted and verified building blocks for
complex application
● Using standards your product will be able to interoperate with existing and future products in the a
specific environment/technology ecosystem
● A deep knowledge of existing standards helps a lot thinking new application composing complex
solution based on them
● An open mindset about standards helps in defining new ones starting from your concrete
implementation, guarantee better interoperability an enrich the technology ecosystem you are
developing in.
IOW using and defining new standards will make everything easier getting greater res
45

46. Importance of standards in emerging
technologies
Features of an Ideal Standard
● Relevant and necessary, by providing specific value to benefit development
of a product.
● Singular, by focusing on a specific concept.
● Unambiguous, by not being subject to multiple interpretations.
● Consistent, by not conflicting with other documents within its family of
standards.
● Auditable (measureable), with a quantitative exit criterion showing that the
standard was followed.
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47. Importance of standards in emerging
technologies
What Does (and Doesn’t) Go Into a Standard?
● Best practices (things that have worked well)
● Lessons learned (things that haven’t worked well)
● Recent research results
● Able to stimulate further research in related areas
❖ Standards cannot be created for every situation
❖ Sometimes necessary in real practice for a subject matter expert to extrapolate from one or more
existing standards and design principles to solve a specific need
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48. Thanks for coming
0x41a6021A6Dc82cbB0cd7ee0E3855654D225F48C6
I’ll use ethers only for beers :)
● https://www.linkedin.com/in/maeste/
● https://twitter.com/maeste
● https://github.com/maeste/
● http://www.onchain.it/
https://milan2018.blockchainandcryptovalues.com/ 48