Composable Tokens and their Role in Crypto

Composable Token is an ERC-998 token, a standard extension for any non-functional token that adds the ability for non-functional tokens to own other non-functional (ERC-721) and functional (ERC-20) tokens.

What is Composable Token?

The ERC-998 token is similar to the ERC-721 token – they are both non-transferable. The difference is that ERC-998 tokens are “Composable Token” – they allow users to “compose” or “organize assets into complex hierarchies” and trade them by owning them alone.

A non-compound ERC-998 token can represent more than one digital collection item/asset, whether it is a group of ERC-20 tokens, a collection of unique ERC-721 tokens, a mix of them, or another ERC-998 token. Moreover, it allows non-paying tokens to own or belong to other ERC-721 and ERC-20 tokens.

A non-payable composite token is a portfolio of digital assets that includes any type of token, including NFTs, regular ERC-20 tokens, cryptocurrency derivatives and more. ERC-998 enables a number of new usage scenarios because it allows different components to be combined to create a single umbrella asset. This helps users compose trees of linked ERC721 tokens and allows them to sell or buy batches of ERC721 tokens in a single transfer.

To better understand the concept of composite tokens, let’s look at an example. You have 10 ERC-721 tokens, each representing unique digital coins. Let’s say you want to sell them – then you have to do it one at a time. This is where compound tokens can help – you can transfer ownership of all 10 ERC-721 tokens to one parent token. The parent token will then own all the other tokens, and you can sell the entire batch at once.

There are two approaches to creating Composable Token:

  • Composite token from top to bottom – A composite token stores information about its child tokens. Any ERC-721 token can be translated into a top-down composite token. You can treat it as a container for ERC-721 tokens. You can store and transfer tokens to and from it. You can fill the “container” with as many individual ERC-721 tokens as you want, and then exchange or transfer the composite token as a whole.
  • Bottom up composite tokens – Bottom up composite tokens store information about the parent token. Bottom-Up composite tokens join other ERC-721 tokens as child tokens. Let’s say you can attach a whole bunch of Bottom-Up composite tokens to an ERC-721 token and just pass it on to someone else. The next owner will have access to all of the individual composites included in the ERC-721 token.

Radoslav Zagurovic, CEO and co-founder of Hoard, is a software development expert and blockchain specialist. With ten years of professional experience, Radoslav is highly skilled in project management, software development, algorithms and blockchain technology. Radoslav has worked as a software developer for well-known companies such as Samsung Electronics and the Institute for Structural Research. He is a co-founder of Golem Network, a board member of imapp.pl and has been involved in the development of the Ethereum ecosystem since the beginning.

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