Get a glimpse of Ethereum Token Standards
A quick introduction for everybody.
You may have heard of Ethereum but did you know? ⬇️
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.
Tokens are digital assets built on top of a blockchain that can represent digital shares in an asset (e.g. money), a proof-of-membership in an organization (e.g., concert tickets) or even your identity (e.g., passports).
Why are token standards used?
Token standards are used to make sure that tokens can be exchanged between people and platforms. If a token standard is not used, then it’s nearly impossible for the value of one token to be transferred or exchanged for another type of token.
Token standard Examples
Here are some examples of token standards. Beside those mentioned below there are ERC-1155 and ERC-4626. You should definitely check them out too. This article will only scratch on the surface. If you want to gain more detailed knowledge — Check out the official Ethereum documentation!
ERC20
ERC20 is a standard that defines a set of rules that an Ethereum token must follow. It specifies the functions and events that a token contract must implement, as well as a standard for token contracts to follow when writing these functions and events.
ERC20 was created by Fabian Vogelsteller in 2015, who later went on to work at both Consensys and MakerDAO (the maker of Dai stablecoin). The ERC20 Token Standard allows for interoperability between different tokens on the Ethereum blockchain.
If you want your own cryptocurrency or digital asset to be compatible with other Ethereum-based software, it will need to comply with ERC20 standards. This means you can store your new coin on hardware wallets like Trezor or Ledger Nano S without any problems because they’re compatible with ERC20 tokens; similarly, exchanges such as Coinbase also support them since they adhere to this same standard.
ERC721
The ERC721 standard is an Ethereum token standard that allows for the creation of non-fungible tokens (NFTs). It was proposed by Dieter Shirley and Fabian Vogelsteller as a solution to some of the limitations of the ERC20 token standard. The most important difference from its predecessor is that NFTs can have different values and characteristics (e.g., one token might be worth more than another). A popular example for NFTs are collectible items like CryptoKitties, which can be bought, sold or traded with other users.
ERC777
ERC777 is a proposed standard for crypto tokens. It is designed to be used in decentralized applications, but it has also been proposed as an improvement upon ERC20 and ERC721. The ERC777 standard allows developers to support several different types of crypto assets in their apps, making them more flexible than other token standards.
While similar to existing standards like ERC20 and ERC721, this one offers several benefits over its predecessors:
- Support for multiple types of digital assets within the same contract
- Ability to send multiple types of digital assets at once (ie., you can send both ETH and BAT with one transaction)
At a high level, Ethereum token standards are rules that all tokens must follow.
For the most part, Ethereum tokens can do anything a smart contract can do. However, there are a few rules that all tokens must follow in order for them to be compatible with each other. These rules make it easier for developers to build new tokens and users to interact with them. They also help exchanges list new tokens more quickly and securely.
Conclusion
At a high level, Ethereum token standards are rules that all tokens must follow. These rules ensure that the tokens work on the Ethereum network and can be easily integrated into other applications. It is important for you to know about these standards so that when you are building your own application or using someone else’s, it will work seamlessly with other projects built with these standards in mind.
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Resources ⚡️ Link 1: ethereum.org/en/developers/docs/standards/t..