NFT Series

Redeemable NFT (EIP-5560)

What if the concept of redeemability would be associated with NFTs

Published in

Coinmonks

4 min readDec 20, 2022

Redeemable Non-Fungible Tokens (NFTs) are a new form of digital asset that has recently been gaining attention in the blockchain space. NFTs are unique digital assets that represent ownership of a certain asset, such as a digital artwork, a collectable, or an in-game asset. Redeemable NFTs are a special type of NFT that can be exchanged for a physical good or service.

What is a redeemable NFT?

The EIP-5560 introduced the concept of redeemability associated with NFTs a few months ago (August, 30). The proposal is in draft status, anyway the concept of redeemable NFTs is straightforward: the buyer of an NFT can exchange it for another asset, such as a real-world item, or another digital asset.

Redeemable NFTs are designed to bridge the gap between the physical and digital worlds. With the help of a smart contract, users can use the NFTs to purchase physical goods such as apparel, collectables, and even tickets to events. The NFTs can also be used to redeem rewards, services, and special offers.

The usefulness or futility of this new type of NFT is yet to be determined, anyway, I would like to explore the pros and cons of this additional feature of an NFT.

Pros of Redeemable NFTs

Offer a tangible value: redeemable NFTs are a great way to exchange digital assets for something of tangible value, such as a physical item or service. This makes them more attractive to investors, as they can see the possibility of gaining a tangible benefit from their investment.

Increase the value of goods and services: by creating a digital asset that can be exchanged for a tangible item or service, businesses can increase the value of their goods and services. This is because NFTs can be used to create a scarcity of the item being sold, as well as to offer customers the opportunity to own something of value.

Pave the way to new business: redeemable NFTs can also be used to create new business models and revenue streams. For example, companies can issue their own redeemable NFTs and use them to issue vouchers or rewards to their customers. This could be used to incentivize customers to purchase products or services from the company.

Create digital collectables: as with any NFT also redeemable NFTs can be used to create digital collectables, such as rare artwork or limited edition gaming items. This allows users to own something unique and collectable, which creates a market for these items, as well as a demand for them.

Cons of Redeemable NFTs

Prone to fraud: NFTs are still a relatively new concept, and as a result, there is a risk of fraud associated with them. It is important to take necessary precautions when investing in NFTs to ensure that you are not scammed.

Not yet widely adopted: redeemable NFTs are still a relatively new concept, and as a result, they are not yet widely adopted. This means that there is still a risk associated with them, as they have yet to be tested in the real world.

Can be difficult to use: NFTs can be complicated to use, as they require a certain level of technical understanding. This means that they are not suitable for everyone, as not everyone is comfortable with the technology.

The reference implementation

As usual, I like to have a look at the code of the reference implementation. This is the standard interface of a Redeemable NFT as defined in the EIP.

An ERC-721 contract has to implement this interface to provide a method of receiving information on redeemability.

Anyone can call the isRedeemable() function to check the redeemability status. This function should return:

true: if the NFT is redeemable,
false: when the NFT was already redeemed.

The redeem() function visibility is public by default, so anyone can trigger it. The EIP strongly recommends adding a require statement to restrict access. The decision about who is allowed to redeem the NFT has to be taken accordingly to the NFT issuer policies and requirements.

When the redeem() function is called, the Redeem event is emitted, so that third-party services may listen to this event to be updated on the redeemable status of the NFT.

Conclusion

Redeemable NFTs are a relatively new concept, and as a result, they come with both pros and cons. For those looking to invest in something of tangible value, or to create a digital collectable, they can be a great option. However, it is important to be aware of the risks associated with them, such as fraud and the lack of widespread adoption.

Overall, redeemable NFTs are an innovative way to bring the physical and digital worlds together. This technology has the potential to revolutionize how we conduct business and interact with digital assets. It remains to be seen how this technology will evolve in the future

What do you think about it? Redeemable NFTs are here to stay or not?

Also, Read

Copy Trading | Crypto Tax Software
Grid Trading | Crypto Hardware Wallet
Crypto Telegram Signals | Crypto Trading Bot
Best Crypto Exchange | Best Crypto Exchange in India
Best Crypto APIs for Developers
Best Crypto Lending Platform
Free Crypto Signals | Crypto Trading Bots
An ultimate guide to Leveraged Token