With Rug pulls taking in $2.8 billion dollars in crypto last year, the proposed solution for a more stable NFT ecosystem is a new token standard called ERC721R. On April 11th, 2022 the ERC721R token standard was released. It builds off the ERC721 smart contract standard, which NFTs typically use. The major difference between these contracts is the fact that ERC721R can implement a refund.
Tokens that utilize the standard will come with a refund feature. This will allow users who mint an ERC721R NFT will be able to trade the NFT back for the original mint price within a specific frame.
Launched by CryptoFighter, a P2E (play-to-earn) blockchain game, ERC721R implements trustless refunds to NFT smart contracts and allows minters to return their minted NFTs within a given refund period. The low-risk nature of refundable mints and accountability allows collectors to feel secure in auto-minting projects, according to ERC721R.org.
The NFT creator cannot withdraw funds from the smart contract during the refund period so you’re guaranteed that your cryptocurrency is there when requesting a refund.
ERC721R.org encourages more creators to adopt the ERC721R standard smart contract to prevent rug pulls, increase creator accountability, protect floor prices, and more. Collectors will still be responsible to pay gas fees to mint and obtaining a refund for their NFT. gas to mint and refund.
Prevents Rug Pulls
If you have 30 days to request a refund after mint this stops quick rug pulls where the artists don’t deliver as promised. CryptoFighter Alliance stated that the ERC721R contract will signal to collectors that you will not rug them.“For collections, the benefit is primarily signaling to collectors that you are unlikely to rug them, helping you build a more committed community and sell out faster. Also a refund helps support a floor price during the initial refund period.”
The ERC721R also allows holders to see if the creator of the NFT is making good on their promises to the communities and how they handle the community during the refund period.
Floor Price Is Protected
A collector would not have to sell below mint during the refund period because they could request a refund; thus the floor price will be protected.
If a collector doesn’t like the direction that the project is going in, they can return their NFTs and receive a refund.
“The NFT space needs a way for creators to stand above the noise and separate themselves from the rug pulls.”
I’m seeing promoted tweets with the ERC721R and I just want to say I think it’s a cool concept. But has SO many fundamental flaws. The concept would never work in practice. People would max mint and the second they can’t sell their remaining tokens above floor they refund. GGEZ
— Popeye (@PopeyesNFTs) April 11, 2022
In 2020, rug pulls accounted for 1% of all scam revenue and jolted to 37% in 2021.
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