The ERC-721R, a new NFT standard, was officially released on April 11. It adds an important redemption feature for smart contracts, allowing minters to redeem minted NFTs within a specified period and receive a corresponding refund.
ERC-721R, a new standard against fraudulent NFT projects
The ERC-721R repository on the GitHub page contains details of the new standard, which was created following many community suggestions calling for greater accountability of NFT creators.
Today’s marketplaces have suffered from the presence of fraudulent projects or projects with mechanisms that are not up to the level of the ecosystem of these products, giving rise to rug-pulls with onerous economic damages, but above all leading to a loss of credibility for those who are trying to make this sector grow.
The offer of a refund, guaranteed by this new standard, offers greater protection to buyers and greater legitimacy to creators, as can be read on the official website, thus protecting both parties and representing a new starting point for this market.
How does it work?
When an NFT is minted with this standard, the funds are held in an escrow account bound by a smart contract.
The creators are unable to withdraw these funds until the end of a waiting period that allows buyers to return their NFT and receive a refund from the subscribed smart contract. The underlying logic is very similar to that of escrow.
If during this period the creators decide to rug-pull, buyers will be able to request a refund of their funds before the end of the waiting period, losing only the gas fees incurred for transaction costs.
The advantages for buyers are therefore manifold:
- Low-risk purchase (in the worst case scenario the money is recovered minus the gas fees)
- Protection from rug-pulls
- Increased responsibility on the part of creators
Advantages for creators
As far as sellers are concerned, it allows them to build confidence in the market. In fact, potential buyers who favour an ERC-721R standard rather than the ERC-721 or ERC-1155 will be more inclined to buy.
It should also be noted that new dynamics are being created. The floor price of the collection is unlikely to fall below the minting price, especially while redemptions are still open.
The redemption period and other features of the NFT can be chosen independently by the various projects that decide to adopt this new standard.
This will open up new trading scenarios that will lead towards a maturation that has been motivated by the market itself and which already counts several projects that have adopted the new standard since its debut such as CryptoFighters, Exodia and Curious Addys’.