Why do P2E games use ERC-1155 tokens?

ERC-1155 is an Ethereum token standard that combines two others: ERC-20 and ERC-721. 

ERC-20 is used for fungible assets like cryptocurrencies. It allows developers to create their own currencies on Ethereum. For example, the stablecoin USDC, Binance Coin (BNB), or Uniswap (UNI) are all ERC-20 tokens. You can exchange these fungible tokens with another identical currency of the same value. In P2E games, governance and utility tokens used for value transfers deploy ERC-20. An example is the SAND token used in the Sandbox game ecosystem. 

ERC-721 is a standard used for most non-fungible assets (NFTs). It’s applied to create unique assets that are indivisible and can’t be exchanged equivalently, unlike ERC-20 tokens. Game assets like heroes, skins, accessories, and metaverse virtual lands are represented by ERC-721 tokens. For example, Sandbox Lands use this standard. 

Why do blockchain games need another standard?

It was the blockchain company Enjin that introduced the new ERC-1155 standard. The aim was to address the deficiencies of ERC-20 and ERC-721, particularly in the game industry. 

These standards aren’t ideal for play-to-earn games because each asset requires its own dedicated smart contract. Blockchain games include hundreds, if not thousands, of assets. Moreover, many players play the games simultaneously. As a result, transactions become too slow and expensive.

A single contract copes with multiple token types.

A remedy to transaction problems is to use a standard that can represent multiple token types at the same time. This way, you can wrap different asset types in a single contract. As a result, the number of transactions, hence the costs, can be reduced. 

You can’t bundle ERC-20 or ERC-721 assets together into one single contract. In other words, you must carry out a different transaction for each asset. In a P2E game, for example, you can’t sell an NFT asset and make a payment using the game’s native currency within the same transaction. 

ERC-1155 makes it possible, eliminating the need for multiple transactions because its smart contract can represent multiple token types, i.e., fungible and non-fungible. 

Batch transferring multiple assets is possible.

It’s worth emphasizing that ERC-1155 enables transactions of multiple assets of the same type as well. As an asset owner, you can bring multiple NFT assets together and sell them using a single contract, thanks to the batch transfer ability of ERC-1155. This also results in reduced transaction costs. 

For example, the Sandbox asset designers can mint any number of copies of the same digital asset using the ERC-1155 standard. This allows them to generate collections of items they can sell to others. 

Semi-fungible tokens

An ERC-1155 contract can include any combination of non-fungible and fungible tokens. Consequently, new token functionalities emerge, such as semi-fungible tokens (SFT).

SFTs are like event tickets. Your ticket is interchangeable before the event takes place; it is fungible. But after the event, the ticket can only serve as a collectible; it is non-fungible. 

An application is Decentraland-backed Fanz, which is an NFT event ticketing platform. It allows users to create secure metaverse events where tickets are represented with ERC-1155. 

Safe transfer function

ERC-1155 helps resolve another issue that goes hand in hand with ERC-721 and ERC-20 tokens. When, for example, you send an ERC-721 NFT to the wrong address, you can’t take your token back. However, with ERC-1155, you can reclaim it thanks to a safe transfer function. 

The bottom line

Although NFTs have enjoyed widespread use among gamers and caught public attention in recent years, they have a long way to go, particularly regarding the use cases of NFTs. 

By introducing different standards, developers are exploring new ways to cope with the shortcomings of current approaches. In this regard, ERC-1155 functions as a versatile and flexible standard applicable to cases where simultaneous use of fungible, non-fungible, and semi-fungible tokens are desired.