Token standards are a critical part of the process in the world of cryptocurrencies and blockchain technology that fuels interoperability, security, and efficiency amongst different platforms. Whether you’re an investor, a developer, or someone who’s just gotten started with crypto, you want to know pretty much everything there is to know about the blockchain universe and these standards to make sense of that world.
In this article, we explain the role of token standards and what different token standards mean in practice, going into each standard we use in our product today: ERC-20, ERC721, ERC1155, and more. Secondly, we will also explore token standards for those other blockchains like Solana, EOS, and Tezos.
What are Token Standards?
In simple terms, a token standard refers to a set of rules that define how tokens should behave on a blockchain. Such standards will ensure that tokens are compatible with other applications and easily be able to be transferred or traded or integrated into other platforms.
That in a nutshell is a token: a digital asset created on a blockchain that could represent cryptocurrency, digital art, real estate, or even voting rights. With token standards, developers can ensure tokens behave in a good way so that users can trust them.
Common Token Standards on Ethereum
The creation and management of the tokens on the blockchain is possible on a token on the most popular blockchain platform, Ethereum. As Ethereum’s token standards are foundational to hosting so many applications such as decentralized finance (DeFi), decentralized finance, and nonfungible tokens (NFTs), we must get these right. The most commonly used token standards on Ethereum are listed below.
ERC-20 Token Standard
The most widely used token standard on Ethereum is the ERC-20 standard. A set of rules that a token should follow to be considered an ERC-20 token is defined. It is this standard that guarantees the tokens are going to be compatible with Wallets, Exchanges, and any other application. ERC 20 token standard defines Transactions, Balance Tracking, and User–approval transactions.
Example of ERC-20 Tokens:
- USDT (Tether)
- DAI (Dai Stablecoin)
- LINK (Chainlink)
ERC-721 Token Standard
NFTs are just nonfungible tokens that are created with ERC 721. ERC-721 tokens are unique, so they are unlike ERC-20 tokens, where every token is identical. An ERC-721 token is specific to one distinct item such as digital art, collectible, or in-game asset.
Example of ERC-721 Tokens:
- CryptoPunks
- Bored Ape Yacht Club
- Decentraland
ERC-777 Token Standard
ERC-777 is an improvement upon ERC-20. It is a more efficient token transfer, more secure, and allows for sending tokens with data. In addition to the ability to support more complex interactions, ERC-777 stands out as one of the better features of this token standard due to its ability for smart contracts to be notified whenever tokens are sent to them.
ERC-1155 Token Standard
There is the ERC-1155 standard which allows for fungible & nonfungible tokens to be created in a single contract. However, its flexibility is especially useful for gaming applications and platforms that must deal with both types of tokens. With ERC-1155, it takes less gas when you do a batch transfer that involves more than one token.
Example of ERC-1155 Tokens:
- Enjin Coin
- Gods Unchained
Token Standards for Other Blockchains
Ethereum isn’t the only blockchain with token standards. Other blockchains have their own standards designed to enhance functionality, security, and scalability.
Token Standards for Solana
We all know that Solana provides high-speed and low-cost transactions. SPL tokens are the token standards of Solana network, allowing developers to create tokens designed just for the Solana network. With Solana Program Library (SPL) tokens, Solana ecosystem is highly interoperable, so it is simple to create decentralized applications (dApps) that need fast and cost-effective transactions.
Token Standards for EOS
One blockchain that supports the creation of tokens is EOS. Its EOSIO token standards allow the creation of custom tokens with customizable parameters, like staking mechanisms and a set of different permissions. EOS tokens are used for decentralized applications (dapps) on the EOS network.
Token Standards for NEO
NEOP is the blockchain-based around NEP-5 as its dominant token standard. Just like Ethereum’s ERC-20, the NEP-5 standard looks very similar, but for the NEO blockchain. NEO’s ecosystem relies on NEP-5 tokens for decentralized applications and smart contracts.
Token Standards for Tezos
The tokens created for Tezos use the FA1.2 and FA2 token standards for the creation of custom tokens. FA1.2 is almost the same as ERC 20 but FA2 can create both fungible and non-fungible tokens aka NFT in one contract only. It is simple compared to ERC 1155 on Ethereum.
Understanding Token Standards
But why do we need token standards? The Benefits of the Standards to the Blockchain Ecosystem are Very Clearly Many. Read below to know some of the key advantages of using token standards.
10 Key benefits of Token Standards
- Interoperability: Token standards guarantee that tokens can interact with other applications and platforms to make the blockchain ecosystem more interworking.
- Reduced Complexity for Developers: With an existing standard, developers don’t have to invent new rules for each token—creating process is more efficient.
- Enhanced Liquidity: If tokens follow a standard, then it increases the likeliness that exchanges and wallets would support that token, thereby improving liquidity.
- Improved Security: They have been tested and audited, well-defined standards proven secure and vulnerable less.
- Simplified Integration: Token Standards make integration of tokens into decentralized applications (dApps) easier as developers do not need to concern themselves about compatibility matters.
- Economic Efficiency: The token standards can optimize the transaction costs, making token transfer economically more efficient.
- Community and Ecosystem Support: Large communities support standards (i.e. more resources, tools, and networks provided to developers to help them build).
- Regulatory Compliance: Tokens tend to be easier to manage with legal frameworks, and are more likely to meet regulatory requirements, by adhering to known standards.
- Market Confidence: Token standards help to build trust between investors and tokens because token standards ensure that tokens behave according to a well-defined and predictable manner.
- Future-Proofing: This might be a little surprising…but token standards evolve to reflect the integration of new, exciting features and improvements that will keep tokens relevant as technology progresses.
Crypto Token Standards guide: ERC vs BRC vs BEP vs TRC
When you start exploring crypto tokens you’re bound to find a variety of token standards. Some of the most common ones are ERC tokens, used mostly for Ethereum, and BRC, BEP-20, and TRC tokens used on Bitcoin, Binance Smart Chain, and TRON, respectively.
What is a Token Standard?
A token standard is a blueprint that describes what a token should do on a blockchain. As a case in point, ERC-20 tokens follow particular rules on the Ethereum network so as to be interoperable with the wallets and exchanges that support this particular standard.
Token Standards by Blockchain
- ERC tokens: Ethereum’s standard for fungible and non-fungible tokens.
- BEP-20 tokens: A standard on Binance Smart Chain that is similar to ERC-20.
- TRC tokens: Used on the TRON blockchain for creating tokens.
- BRC tokens: A standard on the Bitcoin network for token creation.
Crypto Coin Vs Token
Tokens and coins must be properly differentiated; in fact, cryptocurrency coins (e.g., Bitcoin and Ethereum) are one thing and tokens is another. Tokens represent something that is created on top of an already existing blockchain, excluding coins that often represent the native well of the blockchain.
Conclusion
On this final note, token standards are an integral part of the blockchain community, allowing for consistency, security, and efficiency not only in single platforms but across the community. If you’re building decentralized applications or trading NFTs and fungible tokens, knowing the rules and guidelines of token standards such as ERC-20, ERC-721, ERC-777, and ERC-1155 as you navigate this complex world of blockchain technology will help you progress with ease. Being informed about new token standards and their effects on blockchain interoperability is important, as crypto continues to expand.
By utilizing token standards, blockchains such as Ethereum, Solana, and Binance Smart Chain are able to give them enhanced interoperability, scalability, and security in comparison to their alternatives, allowing for easier participation in digital asset verification. Whether you’re seeking to create new projects, invest in crypto tokens, or simply the new world of NFT, having a good understanding of token standards will put you ahead of the competition.
FAQs
What are ERC20 and ERC-721 standards?
Fungible tokens (ERC-20) and non-fungible tokens (ERC 721) are both token standards — but one for fungible tokens and one for non-fungible tokens — or, unique digital assets.
What are the token standards ERC20?
ERC-20 defines a standard for creating fungible Ethereum tokens.
What are the ERC standards for NFT?
The two most used standards for NFTs on Ethereum are ERC-721 and ERC-1155.
What token standard does Bitcoin use?
Unlike Ethereum, Bitcoin doesn’t use token standards but we are seeing token standards like BRC-20 starting to show up on the Bitcoin network.
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