The ERC-721 standard for NFTs on Ethereum faces challenges in representing intricate ownership structures, prompting the development of ERC-998. As an extension of ERC-721, ERC-998 introduces composability, revolutionizing the handling of digital assets on the blockchain.

ERC-998 serves as a standardized contract interface that expands ERC-721’s capabilities, enabling NFTs to own other NFTs or fungible tokens. This enables the creation of complex digital assets by combining multiple components, establishing hierarchies or relationships between them.

Composability in ERC-998 manifests in two forms: top-down and bottom-up. Top-down tokens manage collections of child tokens, while bottom-up tokens are linked to parent NFTs, often serving as non-transferable badges or certifications.

Key features of ERC-998 include hierarchical ownership, facilitating the creation of complex ownership structures, and ease of transferability for composite tokens. Atomic transactions ensure the integrity of transfers, avoiding discrepancies or issues.

ERC-998 unlocks various use cases across industries such as gaming, digital collectibles, real-world asset representation, and identity verification. While it offers advantages like increased versatility, it also faces limitations such as gas costs and lack of support from some NFT marketplaces and wallets. Nonetheless, ERC-998 represents an exciting development encouraging experimentation and innovation in the NFT space.