Composable Token

November 21, 2023 - Around 3 mins mins to read

Understanding the Concept of a Non-Fungible Composable Token

A Non-Fungible Composable Token, specifically known as the ERC-998 token, shares similarities with the ERC-721 token in that they are both non-fungible. However, what distinguishes the ERC-998 token is its unique feature of composability. This means that users have the ability to organize and compose assets into complex hierarchies and trade them as a single ownership.

The ERC-998 token, being a non-fungible composable token, has the capability to represent multiple digital collectibles or assets. It can encompass a group of ERC-20 tokens, a collection of unique ERC-721 tokens, a combination of both, or even another ERC-998 token. Additionally, it allows non-fungible tokens to possess or be possessed by other ERC-721 and ERC-20 tokens.

In essence, a non-fungible composable token functions as a portfolio or bundle of digital assets. These bundles can include various types of tokens such as art, game, and sport NFTs, regular ERC-20 tokens, crypto derivatives, and more. The ERC-998 token enables new use cases by facilitating the connection of multiple components to generate a unified umbrella asset. This feature allows users to create interconnected trees of ERC721 tokens and enables the sale or purchase of batches of ERC721 tokens in a single transfer.

To better understand the concept of composable tokens, consider the following example. Imagine you have 10 ERC-721 tokens, each representing a unique digital coin. If you want to sell them, you would typically need to do so individually. However, with the composability functionality, you can transfer ownership of all 10 ERC-721 tokens to a single parent token. Once this transfer is complete, the parent token becomes the owner of all the other tokens, allowing you to sell the entire lot at once.

Building Composable Tokens

There are two approaches to constructing composable tokens:

Top-Down Composable – In this approach, the composable token stores information about its child tokens. Any ERC-721 token can be converted into a top-down composable token. Think of it as a container for ERC-721 tokens. You can add and remove tokens from the container as desired. The filled “container” can then be traded or transferred as a whole.

Bottom-Up Composable – In this approach, the bottom-up composable tokens store information about the parent tokens. Bottom-up composables can be attached as child tokens to other ERC-721 tokens. For example, you can attach multiple bottom-up composables to an ERC-721 token and transfer it to another user. The new owner will then have access to all the individual composables that are part of the ERC-721 token.

About the Author:

RadosÅ‚aw ZagÃ³rowicz, the CEO and co-founder of Hoard, is a highly skilled software developer and blockchain specialist with ten years of professional experience. He has expertise in project management, software design, algorithms, and blockchain technology.

Radoslaw holds a master’s degree in applied mathematics from the University of Warsaw and has worked with renowned brands such as Samsung Electronics R&D and Institute for Structural Research. He is also a founding member of the Golem Network, a board member at imapp.pl, and has been actively involved in the development of the Ethereum ecosystem since its inception.

Connect with Radoslaw on Twitter.