A composable token is an ERC-998 token, a standard extension to any non-fungible token, adding the ability for non-fungible tokens to own other non-fungible (ERC-721) and fungible (ERC-20) tokens.
In general, the ERC-998 token is similar to the ERC-721 token — both are non-fungible. However, ERC-998 tokens are “composable,” meaning they allow users to “compose” or “organize assets into complex hierarchies” and trade them with single ownership.
The non-fungible composable token, ERC-998, can represent more than one digital collectible/asset, be it a group of ERC-20 tokens, a collection of unique ERC-721 tokens, a mix of both, or another ERC-998 token. Furthermore, it allows non-fungible tokens to own or be owned by other ERC-721 and ERC-20 tokens.
Simply put, a non-fungible composable token is a portfolio or bundle of digital assets. These bundles can include any type of tokens, including art/game/sport NFTs, regular ERC-20 tokens, crypto derivatives, and more. The ERC-998 token powers a series of new use cases, primarily because it allows several components to connect to generate one umbrella asset. This can help users compose trees of connected ERC721 tokens and enable them to sell or buy batches of ERC721 tokens in a single transfer.
Here is an example to help you better understand the concept of composable tokens. Let’s say that you have 10 ERC-721 tokens, each representing unique digital coins. If you want to sell them, you’ll need to accomplish this on a one-by-one basis. But with composability functionality, you can transfer ownership of all of the 10 ERC-721 tokens to a single parent token. Once done, the parent token owns all the other tokens, allowing you to sell the entire lot at once.
There are two approaches to building composable tokens:
Top-Down Composable - In this scenario, the composable token stores information about its child tokens. Any ERC-721 token can be transferred into a top-down composable token. Think of this approach as a container for ERC-721 tokens. You can store and transfer the tokens in and out of it. You can fill the “container” with as many individual ERC-721 tokens as you want, then trade or transfer the composable as a whole.
Bottom-Up Composable - In this scenario, the bottom-up composable tokens store information about the parent tokens. Bottom-up composables can attach themselves as child tokens to other ERC-721 tokens. For instance, you can attach a whole bunch of bottom-up composables to an ERC-721 token and simply transfer it to someone else. By design, the new owner will now have access to all individual composables that are part of the ERC-721 token.
Radosław Zagórowicz, the CEO and co-founder of Hoard, is an expert software developer and blockchain specialist. With ten years of professional experience, Radoslaw is highly skilled in project management, software design, algorithms and blockchain technology.
With a master’s degree in applied mathematics from the University of Warsaw, Radoslaw has worked as a software developer with prominent brands like 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 involved with Ethereum ecosystem development since its very beginning.
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