10.1 Token Standards and Types (ERC-20, ERC-721, etc.)
3 min read•august 6, 2024
Token standards are the backbone of 's thriving ecosystem. They set the rules for creating and using different types of tokens, from fungible cryptocurrencies to unique digital collectibles. Understanding these standards is key to grasping how value moves in the blockchain world.
and are the most important token standards to know. ERC-20 is for regular, interchangeable tokens like cryptocurrencies. ERC-721 is for one-of-a-kind tokens called NFTs, used for things like digital art or virtual real estate.
Token Standards
Ethereum Token Standards
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NFT(Non-Fungible Token)는 무엇인가? NFT의 종류? 역사? View original
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ERC20和TRC20的区别，哪个对USDT传输更好?-伦客网 View original
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Top images from around the web for Ethereum Token Standards
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NFT(Non-Fungible Token)는 무엇인가? NFT의 종류? 역사? View original
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Non-fungible token - Wikipedia View original
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- Token standards provide a common set of rules and interfaces for creating and interacting with tokens on the Ethereum blockchain
- ERC-20 is the most widely used token standard for fungible tokens (cryptocurrencies, utility tokens)
- Defines a standard interface for fungible tokens, including functions like
,transfer
, andbalanceOfapprove - Allows tokens to be easily integrated into wallets, exchanges, and other applications
- Defines a standard interface for fungible tokens, including functions like
- ERC-721 is the standard for non-fungible tokens (NFTs) (collectibles, unique assets)
- Defines a standard interface for NFTs, including functions like
,ownerOf
, andtransferFromapprove - Each ERC-721 token has a unique token ID, representing a specific asset or item
- Defines a standard interface for NFTs, including functions like
Token Interfaces and Ethereum Compatibility
- Token interfaces define the functions and events that a token contract must implement to comply with a specific token standard
- Ethereum's smart contract functionality and the ERC token standards enable the creation and management of various types of tokens
- Tokens can represent assets, utilities, or other forms of value within Ethereum-based applications
- Adhering to token standards ensures compatibility and with other Ethereum tools and services (wallets, decentralized exchanges)
Token Types
Fungible Tokens
- Fungible tokens are interchangeable and divisible, meaning each token unit is equivalent to any other unit of the same token
- Common use cases for fungible tokens include:
- Cryptocurrencies (Ether, Bitcoin)
- Utility tokens for accessing services or products within a specific ecosystem
- Stablecoins pegged to fiat currencies (USDT, USDC)
- ERC-20 is the most widely adopted standard for creating fungible tokens on Ethereum
Non-Fungible Tokens (NFTs)
- Non-fungible tokens (NFTs) are unique, indivisible tokens that represent ownership of specific assets or items
- Each NFT has a unique token ID, allowing it to be distinguished from other tokens within the same contract
- NFTs are commonly used for:
- Digital collectibles (, NBA Top Shot)
- Virtual real estate and in-game items
- Tokenized real-world assets (artwork, real estate)
- ERC-721 is the standard for creating NFTs on Ethereum, ensuring a consistent interface for managing and trading unique assets
Token Implementation
Smart Contracts for Token Creation
- Tokens are implemented using on the Ethereum blockchain
- Smart contracts define the token's properties, behavior, and functionality
- Token name, symbol, and total supply
- Token and mechanisms
- Transfer and approval functions
- Solidity is the most common programming language for writing Ethereum smart contracts
- Developers can create custom token contracts by inheriting from standard token interfaces (ERC-20, ERC-721)
Deploying and Managing Tokens
- Token contracts are deployed to the Ethereum blockchain, making them accessible to users and applications
- Token creators can define initial token distribution (pre-, token sales, airdrops)
- Token holders can manage their tokens using Ethereum wallets that support the relevant token standards
- Wallets enable token transfers, balance checking, and interaction with token-related smart contract functions
- Decentralized exchanges (DEXes) and token management platforms provide additional liquidity and functionality for token trading and utilization (Uniswap, OpenSea)
Key Terms to Review (24)
Binance Smart Chain: Binance Smart Chain (BSC) is a blockchain network that runs in parallel with Binance Chain, designed to enable the creation of smart contracts and decentralized applications (dApps). BSC uses an Ethereum-compatible Virtual Machine, allowing developers to build and deploy their projects using familiar tools and languages, making it easier to create tokens and integrate with existing DeFi platforms. This compatibility supports various token standards, including those similar to ERC-20 and ERC-721, which are widely used in Ethereum's ecosystem.
Burning: Burning refers to the process of permanently removing tokens from circulation, effectively reducing the total supply of a cryptocurrency or token. This mechanism can enhance scarcity, potentially increase value, and is often employed as a strategy for managing inflation within a blockchain ecosystem. It's commonly utilized in various token standards, such as ERC-20 and ERC-721, to create deflationary effects and incentivize holders.
Burning: Burning refers to the process of permanently removing tokens from circulation in a blockchain network, effectively reducing the total supply of that token. This action can help manage inflation, increase scarcity, and can be part of a project's economic model or incentive structure. The burning mechanism is often utilized by various token standards to enhance value for remaining holders by making tokens more scarce.
CryptoKitties: CryptoKitties is a blockchain-based game that allows players to collect, breed, and trade virtual cats represented as non-fungible tokens (NFTs) on the Ethereum blockchain. This game showcases how blockchain technology can create unique digital assets and has played a significant role in popularizing the concept of NFTs, demonstrating both the potential and challenges of using blockchain for gaming and collectibles.
Decentralized Exchange (DEX): A decentralized exchange (DEX) is a platform that allows users to trade cryptocurrencies directly with one another without the need for a central authority or intermediary. This type of exchange uses smart contracts on blockchain technology to facilitate trades, ensuring transparency, security, and control over one's assets. DEXs support various token standards, such as ERC-20 and ERC-721, and utilize diverse order types and trading mechanisms that empower users to engage in peer-to-peer trading more efficiently.
Divisibility: Divisibility refers to the ability of a currency or asset to be divided into smaller units without losing its value. In the context of token standards, it is a crucial feature that enables tokens to be fractionalized, allowing for micro-transactions and increased accessibility for users. This characteristic enhances liquidity and fosters a more inclusive economic environment by enabling users to transact with varying amounts, thereby catering to a wider audience.
ERC-20: ERC-20 is a technical standard for tokens on the Ethereum blockchain, defining a common set of rules that all Ethereum tokens must follow. This standard enables interoperability between various tokens and decentralized applications (dApps), simplifying the development of new tokens and facilitating their integration into the broader Ethereum ecosystem.
ERC-721: ERC-721 is a token standard on the Ethereum blockchain that defines a set of rules for creating non-fungible tokens (NFTs). This standard allows each token to have unique properties and attributes, making it suitable for representing digital assets like art, collectibles, and virtual real estate, which cannot be exchanged on a one-to-one basis like traditional cryptocurrencies.
Erc-777: ERC-777 is a token standard on the Ethereum blockchain that enhances the functionality of tokens by enabling advanced features like hooks for transaction notifications and the ability to send tokens without requiring approval. This standard builds on the ERC-20 standard, adding more flexibility for developers and users, while maintaining compatibility with existing ERC-20 tokens. It aims to improve user experience and allow for more complex interactions in decentralized applications.
Ethereum: Ethereum is an open-source, blockchain-based platform that enables developers to create and deploy decentralized applications (DApps) and smart contracts. It goes beyond just being a cryptocurrency by facilitating complex programmable transactions and providing a foundation for various applications across industries, making it a pivotal player in the blockchain ecosystem.
Ethereum Foundation: The Ethereum Foundation is a non-profit organization that supports the development and promotion of the Ethereum blockchain and its ecosystem. It plays a crucial role in funding research, development, and community initiatives that enhance Ethereum's capabilities, security, and usability. The Foundation is pivotal in establishing token standards, such as ERC-20 and ERC-721, and exploring innovative uses of blockchain technology in governance and voting systems.
Ethereum Improvement Proposal (EIP): An Ethereum Improvement Proposal (EIP) is a design document that provides information to the Ethereum community or proposes changes or enhancements to the Ethereum network. EIPs cover a wide range of topics, from core protocol specifications and improvements to standards for smart contracts and tokens, such as ERC-20 and ERC-721, which define how these tokens interact within the ecosystem.
Fungibility: Fungibility refers to the property of an asset or item where individual units are interchangeable and hold the same value. In the context of digital currencies and tokens, fungibility allows tokens to be exchanged on a one-to-one basis without any difference in value, making it a crucial feature for cryptocurrencies like Bitcoin and token standards such as ERC-20, which are designed for fungible tokens. This quality enhances liquidity and simplifies trading, as all units are treated as equivalent.
Gas Fees: Gas fees are the transaction costs required to execute operations on a blockchain, particularly in Ethereum, where they compensate miners for processing transactions and executing smart contracts. These fees are crucial for maintaining network security and functionality, as they influence the speed and cost of transactions, impacting the overall user experience and operational efficiency within various decentralized applications and protocols.
Interoperability: Interoperability is the ability of different blockchain networks and systems to communicate and operate with each other seamlessly. This capability is essential for enhancing collaboration, data exchange, and the overall efficiency of various decentralized applications across multiple platforms.
Liquidity Pool: A liquidity pool is a collection of funds locked in a smart contract that provides liquidity for decentralized trading, lending, or other financial services. By pooling assets together, it enables users to trade without needing a traditional order book, allowing for greater efficiency and reduced slippage. This concept is particularly important for token standards like ERC-20 and ERC-721, as it supports the functionality of decentralized exchanges and other DeFi applications.
Mica - Markets in Crypto-Assets: Mica refers to the proposed regulatory framework in the European Union aimed at establishing a comprehensive approach to the regulation of crypto-assets and their markets. It seeks to enhance consumer protection, increase transparency, and mitigate risks associated with the rapid growth of crypto-assets. This regulatory effort is crucial for the development of standards and types of tokens, such as ERC-20 and ERC-721, which operate within these markets.
Minting: Minting refers to the process of creating new tokens or coins within a blockchain system. This process is essential for establishing new digital assets, allowing users to trade and interact with them on the blockchain. Depending on the type of token being minted, such as ERC-20 or ERC-721, the characteristics and functionalities may vary significantly, reflecting the underlying standards that dictate how these tokens operate within the ecosystem.
Minting: Minting is the process of creating new tokens or coins on a blockchain, effectively adding them to the total supply. This process varies depending on the type of token standard used, such as ERC-20 for fungible tokens or ERC-721 for non-fungible tokens. Each token standard has its own rules and functionalities that dictate how minting occurs, influencing aspects like ownership, transferability, and scarcity.
Non-fungible token (NFT): A non-fungible token (NFT) is a unique digital asset that represents ownership of a specific item or piece of content on the blockchain, distinguishing it from fungible tokens like cryptocurrencies. NFTs enable the ownership and transfer of digital art, collectibles, music, and virtual goods in a way that is verifiable, traceable, and secure. Their uniqueness and indivisibility make them ideal for representing items that require proof of authenticity or scarcity.
Security Token: A security token is a digital representation of a financial asset that is issued and traded on a blockchain, adhering to regulatory requirements and providing ownership rights. These tokens are designed to offer investors more transparency and security compared to traditional securities, as they utilize smart contracts to automate processes like compliance and settlement.
Smart Contracts: Smart contracts are self-executing contracts with the terms of the agreement directly written into code on a blockchain. They automate processes and ensure trust between parties without the need for intermediaries, making them essential for various applications like decentralized finance and supply chain management.
Tokenomics: Tokenomics refers to the study of the economic aspects of a cryptocurrency token, including its design, distribution, supply, demand, and utility within its ecosystem. It plays a crucial role in shaping how a token behaves in the market, influencing investor interest and overall project sustainability by defining the incentive mechanisms that drive user engagement and adoption.
Utility Token: A utility token is a digital asset designed to provide access to a specific application or service within a blockchain ecosystem. These tokens are often used to pay for services, participate in platform governance, or access certain features, making them integral to the functionality of decentralized applications. Unlike cryptocurrencies that serve as a medium of exchange, utility tokens have a specific purpose within their respective ecosystems.