Token Standards || Demystifying Different Token Standards in the Ethereum Ecosystem
One way or another, as a crypto user you must have come across the term “ERC-20”. Surprisingly, most people don’t know what it means despite its popularity in crypto trading and investment. ERC-20 is a type of token standard on the Ethereum blockchain. In this article, I will be diving into different token standards, in particular, to the Ethereum blockchain.
Now let’s explore what token standards actually mean.
What are Token Standards?
Token standards are a set of rules that govern how crypto tokens work on various blockchains. Examples include BEP 20, ERC 20, and ERC 721. These standards are likened to a blueprint on which every token created using them must meet certain specifications. It’s also worth noting that before a token standard can be implemented on a blockchain, it must support smart contracts.
A token standard can be created by any developer. However, it must be accessed by the core developers on the blockchain before it can be implemented.
Types of Token Standards on Ethereum
There are different types of token standards on Ethereum. Nonetheless, I will be discussing four of them that are widely used. Let’s go over some terminologies that will help you understand better.
- ERC stands for Ethereum Request for Comment. It’s a proposal used for creating new token standards.
- EIPs stand for Ethereum Improvement Proposals and are proposals made to improve or change token standards. They become ERCs after they have gone through the process of review.
Now let’s move on to the types of token standards on Ethereum;
- ERC-20
It’s the first type of token standard and the most commonly used in Ethereum. The ERC-20 is used to create fungible tokens. i.e., a token that can be exchanged with another because of the same value. It was developed in 2015 by Fabian Vogelsteller due to the current need for a standard in the ecosystem.
ERC-20 standards define how the tokens are transferred in the ecosystem, the total supply, symbol, wallet address balances and how they’re transferred from one wallet to another. Some examples of crypto tokens built using ERC-20 include $USDC, $LINK, and $MANA, amongst many others.
- ERC-721
This is the token standard for Non-fungible tokens (NFTs) on Ethereum. Non-fungible tokens are assets that cannot be interchanged or exchanged because of their unique value. The ERC-721 is responsible for the guidelines that enable the creation of such tokens. With this standard, it becomes easy to create unique tokens that cannot be duplicated and can also be linked with real-life artworks, music, paintings, and tickets.
- ERC-777
This token standard is also used to create fungible tokens just like ERC-20 however it comes with a unique feature. The unique feature of ERC -777 is the function that solves disparities in minting, burning and introduces the “hook” function. The hook is a function in the token contract that allows recipients to react after receiving tokens.
- ERC-1155
The ERC-1155 token standard was created to be an improvement to the ERC-721 standard. It was introduced by Enjin, a blockchain gaming platform in 2018. This standard allows flexible and better ways to create Non-fungible tokens and fungible tokens. Because of this attribute, it’s known as a multi-token standard; it also supports different types of tokens within a single smart contract.
Conclusion
In conclusion, token standards are needed for smooth interactions and interoperability in a blockchain ecosystem. To get practical knowledge about these standards you can create a token using your desired standard if you have coding skills.
Fun Fact: $ETH (Ether), the native token of the Ethereum blockchain was created before token standards came into existence so it has limited use in the ecosystem. Wrapped Ether (WETH) is a substitute for Ether (ETH) created using the ERC-20 token standard and is equal to 1 ETH.
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