Ethereum Token Standards essentially help create tokens on the network. These tokens are fungible and accepted across the ecosystem, so developers highly demand them.
Ethereum Token Standards have a few rules outlining features. These pertain to checking how many tokens an address has and transferring tokens between addresses, to mention a few.
They are compatible with many wallets, applications, and exchange platforms. They are used as utilities, stablecoins, and/or security tokens. This article explores the world of Ethereum Token Standards and reviews their importance in interoperability and functionality within the Ethereum network.
Understanding ERC (Ethereum Request for Comments)
ERC is an acronym for Ethereum Request for Comments. Rules per ERC govern tokens architected on the native blockchain. Tokens built on the network must meet the steps and standards that the Standards draw. This assists in seamless trading activity within the Ethereum ecosystem.
ERC Standards have expanded into several different types, including ERC-20, ERC-1155, and ERC-721, among others. Every ERC Standard is different and has a unique trait in terms of features and purposes.
Overall, the motive is to strengthen Ethereum’s token economy. What makes these tokens special is their nature of being fungible. They are similar and can be utilized interchangeably.
ERC-20: The Foundation of Fungible Tokens
ERC-20 is the most widely adopted token standard. It serves as a key standard for fungibility to encompass crypto types like security tokens, utility tokens, and stablecoins. It further offers optional functions like ticker symbol, token’s name, and decimal places. Its functions include wallet balances, token supply, and ownership transfer, to mention a few.
ERC-20 is used mainly in projects developing utility and governance tokens for decentralized applications, such as dApps. These tokens operate on the Ethereum network and within its ecosystem. Some examples of popular ERC-20 are LINK, UNI, and USDT.
ERC-721: The Rise of Non-Fungible Tokens (NFTs)
ERC-721 is a token that cannot be exchanged. It sets a unique standard in the ecosystem and was created specifically for NFTs, which can be in-game assets or digital art. Several instances have even brought up event tickets or records of physical asset ownership, the same elements that differentiate it from ERC-20.
Some of the ERC-721 tokens are Bored Ape Yacht Club and CryptoKitties.
ERC-1155: The Multi-Token Standard
ERC-1155 focuses on integrating elements that have greatly benefited its predecessors. Enjin developed it, and the developer-defined it as a single, smart contract that can govern several tokens.
The idea was to navigate a way around the limitations that ERC-721 posed in terms of rigidity with batch transfers. It required users to execute multiple transactions. ERC-1155 enables that flexibility.
Another benefit is a reduction in gas fees. The project utilizing ERC-1155 is Decentraland in addition to Enjin.
Other Notable Token Standards
Other notable token standards are ERC-777, ERC-223, ERC-621, and ERC-827.
ERC-77 aims to improve the capabilities of ERC-20. It brings a hooks feature combining token transfers and contract notifications into one message. This streamlines the process of receiving and sending tokens, improving efficiency.
ERC-223 also extends the ERC-20 model. It basically addresses the bugs in ERC-20 that can lead to token loss. ERC-223 fixes that by facilitating a seamless transfer of tokens to wallets and smart contracts alike. It also maintains most of ERC-20’s original features.
ERC-621 allows holders to redeem their tokens in addition to its burning mechanism. The objective is to reduce the supply and control the prices using the scarcity principle.
ERC-827 is a proposed token standard. If approved, it will expand the utilities of ERC-20 and ERC-223 via support for additional transaction data. Jacques Dafflon, Thomas Shababi, and Jordi Baylina introduced ERC-827 in 2018. A unique feature is approveAndCall. It allows token holders to authorize a transfer while triggering a function call in the same transaction.
Future of Ethereum Token Standards
Suffice it to say that upcoming Ethereum Token Standards aim to enhance their predecessors’ offerings and will further impact the price of Ether. ETH is currently listed at $2,435.09, up 5.66% in the last 24 hours.
Ether price prediction expects the token to surge to $4,097 by the end of 2024. It could alternatively end the year at around $2,685. A lot will depend on the community feedback and collaboration, for that is closely linked to shaping the future standards.