• Jun 22, 2023

Exploring Token Standards: An In-Depth Dive into ERC20, ERC721, and ERC1155

ERC token standards explain certain rules for all the ERC tokens built on the Ethereum blockchain. Ethereum’s community duly reviews this set of rules, and amendments are done based on the changing requirements. Moreover, ERC standards are designed to allow ERC tokens to interact seamlessly.

ERC tokens standard is just another name for smart contract standards. The smart contract on Ethereum must obey the standards or rules to enable essential functions such as token creation, transaction processing, spending, etc. By introducing the improved ERC standards, Ethereum unlocks the true potential of its ecosystem and empowers the development of more specific smart contracts, contributing to the network’s growth.

Evolution of Ethereum token standards

The evolution of token standards is closely tied to the development of blockchain technology and the growth of the cryptocurrency industry. Tokens are digital assets that are created, stored, and transferred on a blockchain network. They can represent anything of value, such as currencies, assets, or rights, and can be used for a wide range of purposes, including payment, investment, and governance.

The first token standard was created in 2012 with the launch of the Mastercoin protocol, which introduced the concept of a meta-protocol on top of the Bitcoin blockchain. This protocol allowed for the creation of new tokens that could be used for a variety of purposes, such as fundraising and asset tracking. In 2015, the Ethereum blockchain introduced the ERC-20 token standard, which has become the most widely used token standard to date. ERC-20 tokens are fungible, meaning that they are interchangeable with each other and can be traded on cryptocurrency exchanges. They are also programmable, which means that developers can create smart contracts that can automatically execute transactions based on predefined conditions.

Since the launch of ERC-20, several other token standards have been introduced, each with its own unique features and use cases. These include the ERC-721 non-fungible token (NFT) standard, which is used for creating unique, one-of-a-kind digital assets, and the ERC-1155 token standard, which allows for the creation of both fungible and non-fungible tokens within the same contract. Other blockchain platforms have also introduced their own token standards, such as the Binance Smart Chain's BEP-20 standard and the Polkadot network's Substrate-based token standard.

As the blockchain industry continues to evolve, it is likely that new token standards will be introduced to meet the changing needs of users and developers. These standards will play an important role in facilitating the growth of decentralized applications and the broader adoption of blockchain technology.

ERC-20 token standards

ERC-20 stands for "Ethereum Request for Comments 20" and is a technical standard used for smart contracts on the Ethereum blockchain. This standard defines a set of rules and requirements that an Ethereum token must follow in order to be fully compatible with the Ethereum ecosystem. ERC-20 tokens are fungible, meaning that each token is identical in value and functionality to every other token of the same type. This makes it easy to exchange them on cryptocurrency exchanges and to use them in decentralized applications (DApps) built on the Ethereum blockchain.

This makes it easy to exchange them on cryptocurrency exchanges and to use them in decentralized applications (DApps) built on the Ethereum blockchain. an ERC-20 token representing a currency can act like the native currency of Ethereum, Ether. That means 1 token will always be equal to the value of another token and can be interchangeable with each other. ERC 20 token set standards for developing fungible tokens.

Characteristics of ERC-20 tokens

  • ERC 20 tokens are another name for ”fungible tokens”.
  • Fungibility defines the ability of an asset or Token to be exchanged for assets of the same value, say two 1 dollar notes.
  • Each ERC-20 Token is strictly equivalent to the same value regardless of its feature and structure.
  • ERC tokens most popular application areas are Stablecoins, governance tokens, and ICOs.

ERC-721: Non- fungible tokens

ERC721 is a standard for non-fungible tokens (NFTs) on the Ethereum blockchain. Each token is unique and cannot be exchanged for another token of equal value. This is different from fungible tokens like Ether (ETH), where each unit is interchangeable and has the same value. ERC721 tokens are used to represent ownership of a particular asset or digital item, such as artwork, collectibles, or in-game items.

Each token has a unique identifier that can be used to track its ownership and transfer it between individuals. The ERC721 standard specifies a set of functions that must be implemented by any contract that conforms to the standard, such as the ability to create, transfer, and track ownership of tokens. This ensures that ERC721 tokens are interoperable and can be used by different applications and services.

The popularity of ERC721 tokens has exploded in recent years, as they have become a popular way to buy, sell, and trade digital assets. The most famous example is the sale of a digital artwork by the artist Beeple for $69 million in March 2021, which was represented as an ERC721 token.

Characteristics of ERC-720 tokens

  • ERC-721 tokens are the standards for non-fungible tokens (NFTs).
  • These tokens cannot be exchanged for anything of equal value since they are one-of-a-kind.
  • Each ERC-721 represents the value of the respective NFT, which may differ.
  • The most popular application areas of ERC-721 tokens are NFTs in gaming.

ERC-1155: Multi-token Standard

ERC-1155 is a multi-token standard on the Ethereum blockchain that allows for the creation and management of multiple types of tokens in a single smart contract. This standard was proposed by the Enjin team in 2018 and has since gained popularity due to its flexibility and efficiency. One of the key benefits of ERC-1155 is that it allows for the creation of both fungible (identical) and non-fungible (unique) tokens within the same contract.

This means that developers can create a wide range of digital assets, such as in-game items, collectibles, and loyalty points, all in one place. ERC-1155 also provides significant gas savings compared to other token standards, such as ERC-20 and ERC-721, because it allows for batch transfers of multiple token types in a single transaction. This reduces the number of transactions required to move multiple assets, which can be particularly useful in high-volume use cases.

Overall, ERC-1155 is a versatile and efficient standard that has opened up new possibilities for the creation and management of digital assets on the Ethereum blockchain.

Characteristics of ERC-1155 tokens

  • ERC-1155 is a smart contract interface representing fungible, semi-fungible, and non-fungible tokens.
  • ERC-1155 can perform the function of ERC-20 and ERC-721 and even both simultaneously.
  • Each Token can represent a different value based on the nature of the token; fungible, semi-fungible, or non-fungible.
  • ERC-1155 is applicable for creating NFTs, redeemable shopping vouchers, ICOs, and so on.

In conclusion , The unique features of each ERC token standard work as a benefit for different enterprises and developers looking to leverage Ethereum. The three tokens- ERC20, ERC721, and ERC1155 are currently highly efficient and inclusive in the digital ecosystem. However, the constant evolution of Ethereum token standards is likely to bring radical advancement of blockchain in the next few years.

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