We propose to extend the EIP-721 standard with a secure locking mechanism. The NFT owners approve the operator to lock the NFT through setLockApprovalForAll() or lockApprove(). The approved operator locks the NFT through lock(). The locked NFTs cannot be transferred until the end of the locking period. An immediate use case is to allow NFTs to participate in smart contracts without leaving the wallets of their owners.
NFTs, enabled by EIP-721, have exploded in demand. The total market value and the ecosystem continue to grow with more and more blue chip NFTs, which are approximately equivalent to popular intellectual properties in a conventional sense. Despite the vast success, something is left to be desired. Liquidity has always been one of the biggest challenges for NFTs. Several attempts have been made to tackle the liquidity challenge: NFTFi and BendDAO, to name a few. Utilizing the currently prevalent EIP-721 standard, these projects require participating NFTs to be transferred to the projects' contracts, which poses inconveniences and risks to the owners:
All of the above are bad UX, and we believe the EIP-721 standard can be improved by adopting a native locking mechanism:
The value of an NFT can be reflected in two aspects: collection value and utility value. Collection value needs to ensure that the holder's wallet retains ownership of the NFT forever. Utility value requires ensuring that the holder can verify their NFT ownership in other projects. Both of these aspects require that the NFT remain in its owner's wallet.
The proposed standard allows the underlying NFT assets to be managed securely and conveniently by extending the EIP-721 standard to natively support common NFTFi use cases including locking, staking, lending, and crowdfunding. We believe the proposed standard will encourage NFT owners to participate more actively in NFTFi projects and, hence, improve the livelihood of the whole NFT ecosystem.
The key words “MUST”, “MUST NOT”, “REQUIRED”, “SHALL”, “SHALL NOT”, “SHOULD”, “SHOULD NOT”, “RECOMMENDED”, “MAY”, and “OPTIONAL” in this document are to be interpreted as described in RFC 2119.
Lockable EIP-721 MUST implement the IERC5058 interfaces:
An NFT owner can give another trusted operator the right to lock his NFT through the approve functions. The lockApprove() function only approves for the specified NFT, whereas setLockApprovalForAll() approves for all NFTs of the collection under the wallet. When a user participates in an NFTFi project, the project contract calls lock() to lock the user's NFT. Locked NFTs cannot be transferred, but the NFTFi project contract can use the unlock function unlock() to unlock the NFT.
Authorized project contracts have permission to lock NFT with the lock method. Locked NFTs cannot be transferred until the lock time expires. The project contract also has permission to unlock NFT in advance through the unlock function. Note that only the address of the locked NFT has permission to unlock that NFT.
When locking an NFT, one must specify the lock expiration block number, which must be greater than the current block number. When the current block number exceeds the expiration block number, the NFT is automatically released and can be transferred.
Bound NFT is an extension of this EIP, which implements the ability to mint a boundNFT during the NFT locking period. The boundNFT is identical to the locked NFT metadata and can be transferred. However, a boundNFT only exists during the NFT locking period and will be destroyed after the NFT is unlocked. BoundNFT can be used to lend, as a staking credential for the contract. The credential can be locked in the contract, but also to the user. In NFT leasing, boundNFT can be rented to users because boundNFT is essentially equivalent to NFT. This consensus, if accepted by all projects, boundNFT will bring more creativity to NFT.
Bound NFT Factory is a common boundNFT factory, similar to Uniswap's EIP-20 pairs factory. It uses the create2 method to create a boundNFT contract address for any NFT deterministic. BoundNFT contract that has been created can only be controlled by the original NFT contract.
This standard is compatible with EIP-721.
Test cases written using hardhat can be found here
You can find an implementation of this standard in the assets folder.
After being locked, the NFT can not be transferred, so before authorizing locking rights to other project contracts, you must confirm that the project contract can unlock NFT. Otherwise there is a risk of NFT being permanently locked. It is recommended to give a reasonable locking period in use for projects. NFT can be automatically unlocked, which can reduce the risk to a certain extent.
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