docs/core-concepts/datanft-and-datatoken.md

---
title: Data NFTs and Datatokens
description: >-
  In Ocean Protocol, ERC721 data NFTs represent holding copyright/base IP of a
  data asset, and ERC20 datatokens represent licenses to access the assets.
---

# Data NFTs and Datatokens

A non-fungible token stored on the blockchain represents a unique asset. NFTs can represent images, videos, digital art, or any piece of information. NFTs can be traded, and allow transfer of copyright/base IP. [EIP-721](https://eips.ethereum.org/EIPS/eip-721) defines an interface for handling NFTs on EVM-compatible blockchains. The creator of the NFT can deploy a new contract on Ethereum or any Blockchain supporting NFT related interface and also, transfer the ownership of copyright/base IP through transfer transactions.

Fungible tokens represent fungible assets. If you have 5 ETH and Alice has 5 ETH, you and Alice could swap your ETH and your final holdings remain the same. They're apples-to-apples. Licenses (contracts) to access a copyrighted asset are naturally fungible - they can be swapped with each other.

![Data NFT and datatoken](../.gitbook/assets/datanft-and-datatoken.png)

### High-Level Architecture

The image above describes how ERC721 data NFTs, ERC20 datatokens, and AMMs relate.

* Bottom: The publisher deploys an ERC721 data NFT contract representing the base IP for the data asset. They are now the manager of the data NFT.
* Top: The manager then deploys an ERC20 datatoken contract against the data NFT. The ERC20 represents a license with specific terms like "can download for the next 3 days". They could even publish further ERC20 datatoken contracts, to represent different license terms or for compute-to-data.

### Terminology

* **Base IP** means the artifact being copyrighted. Represented by the {ERC721 address, tokenId} from the publish transactions.
* **Base IP holder** means the holder of the Base IP. Represented as the actor that did the initial "publish" action.
* **Sub-licensee** is the holder of the sub-license. Represented as the entity that controls address ERC721.\_owners\[tokenId=x].
* **To Publish**: Claim copyright or exclusive base license.
* **To Sub-license**: Transfer one (of many) sub-licenses to new licensee: ERC20.transfer(to=licensee, value=1.0).

### Implementation in Ocean Protocol

Ocean Protocol defines the [ERC721Factory](https://github.com/oceanprotocol/contracts/blob/v4main/contracts/ERC721Factory.sol) contract, allowing **Base IP holders** to create their ERC721 contract instances on any supported networks. The deployed contract stores Metadata, ownership, sub-license information, permissions. The contract creator can also create and mint ERC20 token instances for sub-licensing the **Base IP**.

ERC721 tokens are non-fungible, thus cannot be used for automatic price discovery like ERC20 tokens. ERC721 and ERC20 combined together can be used for sub-licensing. Ocean Protocol's [ERC721Template](https://github.com/oceanprotocol/contracts/blob/v4main/contracts/templates/ERC721Template.sol) solves this problem by using ERC721 for tokenizing the **Base IP** and tokenizing sub-licenses by using ERC20. Thus, sub-licenses can be traded on any AMM as the underlying contract is ERC20 compliant.

### High-Level Behavior

![Flow](<../.gitbook/assets/use case>)

Here's an example.

* In step 1, Alice **publishes** her dataset with Ocean: this means deploying an ERC721 data NFT contract (claiming copyright/base IP), then an ERC20 datatoken contract (license against base IP).
* In step 2, she **mints** some ERC20 datatokens and **transfers** 1.0 of them to Bob's wallet; now he has a license to be able to download that dataset.

### Other References

* [Data & NFTs 1: Practical Connections of ERC721 with Intellectual Property](https://blog.oceanprotocol.com/nfts-ip-1-practical-connections-of-erc721-with-intellectual-property-dc216aaf005d)
* [Data & NFTs 2: Leveraging ERC20 Fungibility](https://blog.oceanprotocol.com/nfts-ip-2-leveraging-erc20-fungibility-bcee162290e3)
* [Data & NFTs 3: Combining ERC721 & ERC20](https://blog.oceanprotocol.com/nfts-ip-3-combining-erc721-erc20-b69ea659115e)
* [Fungibility sightings in NFTs](https://blog.oceanprotocol.com/on-difficult-to-explain-fungibility-sightings-in-nfts-26bc18620f70)