The Capsule Protocol operates on the Ethereum blockchain and allows users to create token-storing NFTs, known as Capsule NFTs. Capsule NFTs follow the ERC-721 standard; they can be viewed, traded, bought, and sold in the same manner as traditional ERC-721 NFTs. However, there is a key difference — Capsule NFTs can be redeemed for their underlying tokens.
The process of creating a Capsule NFT is known as minting. When using the Capsule Protocol, users have the option to store tokens within a Capsule NFT at the time of mint and embed the Capsule NFT with artwork. The tokens stored within Capsule NFTs can be ERC-20 tokens, ERC-721 tokens, or ERC-1155 tokens - that's right; you can store an NFT within an NFT. The user is charged a small fee per Capsule NFT minted. After the Capsule NFT is minted, it can be viewed, traded, bought and sold as any ERC-721 NFT could.
At anytime, the owner of the Capsule NFT is able to redeem it for the tokens that were stored inside. Redeeming the Capsule NFT for the stored tokens burns the Capsule NFT in the process.
The following naming convention is used to describe the various Capsule NFTs that exist. The convention is based on the token(s) that are stored.