What is ERC1155 and what is the use of it?

Think of ERC1155 standard as a cross between ERC20 and ERC721. It was given birth because there was a struggle in the Web3 community to create a single token standard that is both fungible and not fungible.

ERC20 is only fungible and mostly used as a digital currency like AAVE, or LINK. ERC721, on the other hand, is purely non-fungible which gave rise to NFT art mania.

But if you need to use both fungible and non-fungible tokens under one contract instead of managing two contracts – ERC20 and ERC72, you’d use ERC1155.

Having said that, most articles out there often use GameFi as a classic use case for ERC1155. Indeed, because ERC1155 was created for the purpose of perpetuating the Web3 gaming industry. But beyond GameFi, there are other potential use cases that are yet to be tapped.

ERC1155 can be used to create a loyalty program where an enterprise could mint fungible loyalty tokens (points) and issue non-fungible discount coupons.

Members (wallet holders) could earn fungible tokens and use them to redeem for NFT coupons (such as 50% discount vouchers). These NFT coupons can be burned by the contract owner after use. We can up the ante by only issuing soulbound (SBT) coupons that are not transferable between members.

One advantage of ERC1155 against ERC20 is its ability to issue new tokens at will – be it fungible or not. We could only issue one standard token from ERC20 but with ERC155 you can create new sets of fungible tokens (with new token IDs) without limits.

Meanwhile, ERC721 lacks the bulk transfer feature that ERC1155 thrives on. ERC1155 allows the contract owner to transfer multiple fungible and non-fungible tokens to a wallet address under one transaction. However, the current standard lacks the ability to transfer multiple sets of tokens to multiple wallets at once. But this can be overcome by adding in a new bulk transfer function.

Bottomline is, if you’re unsure what the future holds for your Web3 initiative, you may prefer to consider ERC1155 that offers more flexibility. Besides, Web3 is still very much evolving and you don’t wish to be caught off guard.