ERC721R is not a panacea, but there will be tens of thousands of "ERC721R" coming out!

"Although ERC721R cannot fundamentally effectively constrain the NFT project party, ERC721R is more like a sign. It fired the first shot in the project party's power constraint and the protection of the rights and interests of NFT creators, and promoted the NFT market to establish more effective constraints and The checks and balances, that in itself is a great start."

01. What is ERC721R?

On April 11, the "ERC721R" NFT token standard was released. Compared with the ERC721 and ERC1155NFT token standards, ERC721R has added a trustless refund function in the smart contract.

According to the code of Github, ERC721R adds a time check to the withdrawal function, and also adds a refund function for users. That is to say, after the consumer mints the NFT, the project party cannot immediately withdraw the mint funds. The mint funds have a lock-up period. During the lock-up period, users can return the NFT and get a refund.

The length of the lock-up period and the amount of funds that can be returned can be customized by the project party. That is, how long a refund can be made, and how much can be refunded, is ultimately determined by the project party. And how to use the returned NFT is also defined by the project party.

02. What problem does ERC721R solve?

According to the introduction on the official website, the vision of ERC721R is: "Bringing Greater Accountability to NFT Creators", that is, to allow NFT creators to take on more responsibilities.

ERC721R is trying to avoid the potential risk of "running away with money" by the NFT project party by allowing NFT miners to refund within a certain period of time, and at the same time reduce the risk of breaking the NFT miners to a certain extent.

On the ERC721R official website, the official stated four advantages of ERC721R: 1. Prevent Rug Pulls (running money away) 2. Let the project party take more responsibilities and advance the project according to their commitment. 3. Prevent mint price from falling below the floor price 4. Reduce purchase risk.

To put it simply, by setting a refund mechanism, the project party can take on more responsibilities, and the NFT creator can reduce the purchase risk. Then let's take a closer look at the extent to which ERC721R can avoid evil from the project side, and to what extent it can protect the rights and interests of NFT casting.

1. Can the project party be prevented from running away with money? The length of the refund period can be customized, so the project party has great flexibility in setting. If the project party sets 7 days or longer, and once the refund time expires, the project party can run away. Of course, if this time is set for 3 or 5 years, then it will be another story. The longer the time, the greater the sincerity of the project party, the higher the cost of running away with donations, and the less likely it is to run away with money.

2. To what extent can the project party be urged to advance its commitment? The project party can fully fulfill its commitment to the community during the refund period, but this does not affect doing evil after the refund is over .

3. In terms of preventing the mint price from falling below the floor price or reducing the purchase risk, the realization of both is limited to the refund period. After the refund is over, if there is no value support, it is entirely possible for the NFT value to fall below the floor price.

So to sum up, ERC721R has limited effect in avoiding evil by the project party and protecting NFT creators, which largely depends on the length of the refund period set by the project party.

At the same time, according to Jason Chen in "Will the refundable ERC721R become a catfish breaking into the NFT market?" "The description, "When refunding, the money refunded to the user is the amount of NFT multiplied by the mint price, but the mint price is a parameter, as long as it is a parameter, it can be changed. If my mint price is 1eth, the mint will finish the project Fang changed the price to 0eth, then I am lonely...and this process will not be discovered until the user refunds."

In addition, according to GoPocket core developer BenLaw, there is a serious bug in the ERC721R code segment. Due to the lack of restrictions on the refund receiving address, developers can use the bug to withdraw funds in the NFT contract within the ERC721R restriction period. Then bypass the constraints of the protocol and implement RugPull.

03. Is there a better solution than ERC721R?

If ERC721R has a limited role in avoiding evil from the project side and protecting the rights and interests of NFT creators, is there a better solution?

Zebra Venture joined forces with MarsDAO to discuss ERC721R on Twitter Space. Web3 builder and content creator Jason Chen proposed an idea. First, before mint, the project party locked matedata and randomly opened graphs to ensure the fairness of mint. (There are problems such as different probabilities caused by the batch transfer of pictures by the project party.) On the other hand, because the project party’s evil is mainly due to the excessive use of funds, the project party’s right to use funds is reduced through DAO governance and other forms, so as to effectively Restrain the project party and protect the rights and interests of NFT casting.

Content by Jason chen

" Will the refundable ERC721R become a catfish breaking into the NFT market?" "

Regarding the possibility of implementing the above solutions, Jason Chen said that it is not difficult to achieve. The reason why it has not been realized so far is that the infrastructure in the NFT field is not yet perfect. With the improvement of infrastructure, the restraint mechanism for project parties will become more and more perfect. At the same time, the NFT market will become more and more aware of participating in project DAO governance.

04. What is the significance of ERC721R?

Although ERC721R cannot fundamentally effectively constrain the NFT project party, ERC721R is more like a sign, firing the first shot of project party power restraint and NFT minter rights protection, promoting the establishment of more effective restraint and checks and balances in the NFT market mechanics, which in itself is a great start.

In the previous and current NFT market environment, the casting of NFT by NFT market participants depends entirely on their trust in the project party, or based on the project party's commitment to the NFT future Roadmap, but NFT participants can only pray that the project party will not For evil, any promises made by the project party are not bound.

And when all constraints come from self-restraint itself, and when the temptation is strong enough, rug pull (running away with money) will often happen.

As far as the current situation is concerned, after the NFT is minted, all funds will be transferred to the account of the project party. There is no lock-up period for the funds, and the project party can withdraw them at one time. This is like building a project. Before the start of the project, the project payment has been settled to the project party. At this time, the project party can take the money and run away. At the same time, the cost of taking the money to run away is not high, especially for anonymous projects. The cost of doing evil is low. When there are no effective constraints, the possibility of doing evil will increase.

However, ERC721R tries to propose a solution for the current NFT market where project-heavy parties are more dominant. This is a game between buyers and sellers, regardless of how useful ERC721R is in restraining project parties and protecting NFT market participants, but this It is of great significance to promote the establishment of an effective check and balance mechanism in the NFT market and ultimately a healthy and orderly NFT market.

Once one ERC721R comes out, there will be tens of thousands of "ERC721R". Although ERC721R is immature and there are many bugs in the application process, the market needs such a protocol. It is conceivable that a more mature and effective protocol based on ERC721R will come out, and not only the protocol layer, but also the DAO governance of NFT projects and possible external control and supervision will be gradually improved. The future will be a healthier and more Ordered NFT market.