The Ethereum ecosystem thrives on innovation, much of which is driven by a system of technical specifications known as Ethereum Request for Comments (ERC) or Ethereum Improvement Proposals (EIP). These standards ensure interoperability between different applications and smart contracts on the blockchain. This guide provides a detailed overview of the most significant token standards that define how digital assets operate on Ethereum.
Understanding Token Standards
Token standards are blueprints that define how smart contracts should function to create, issue, and manage new tokens on the Ethereum blockchain. They establish a common set of rules that all tokens of a specific type follow, ensuring they can interact seamlessly with exchanges, wallets, and other smart contracts.
Major Fungible Token Standards
ERC-20: The Standard Fungible Token
ERC-20 is the most widely adopted standard for creating fungible tokens. Fungible tokens are identical and interchangeable, like traditional currencies.
- Functionality: It provides a standard API for tokens within smart contracts, including basic functionality like transferring tokens, checking balances, and getting the total supply.
- Use Cases: Utility tokens, governance tokens, and stablecoins.
- Limitations: A known issue is that tokens can be permanently lost if sent to a contract that isn't designed to handle them.
ERC-223: Protecting Against Accidental Loss
ERC-223 was proposed to solve a critical flaw in ERC-20: the accidental loss of tokens sent to incompatible contracts.
- Key Feature: It introduces a function that allows a token contract to determine if the receiving address is a contract. If it is, and it doesn't support ERC-223, the transaction fails, preventing loss.
- Benefit: It makes token transfers more analogous to native Ether transfers in terms of safety.
👉 Explore advanced token security methods
ERC-777: A More Advanced Operator-Based Standard
ERC-777 is a richer standard for fungible tokens that aims to improve upon ERC-20.
- Operators: It introduces "operators" whom users can trust to send tokens on their behalf, simplifying processes like decentralized exchange trading.
- Hooks: Contracts can react to receiving tokens, enabling more complex logic upon transfer.
- Backward Compatibility: It is designed to be backward compatible with ERC-20.
Major Non-Fungible Token (NFT) Standards
ERC-721: The Standard Non-Fungible Token
ERC-721 is the foundational standard for non-fungible tokens (NFTs). Each token is unique and not interchangeable with another.
- Functionality: It standardizes the ownership, transfer, and metadata of unique assets.
- Use Cases: Digital art, collectibles, real-world asset ownership deeds, and in-game items.
ERC-1155: Multi-Token Standard
ERC-1155 is a revolutionary standard that allows a single contract to manage multiple token types, both fungible and non-fungible.
- Efficiency: It enables the batch transfer of multiple token types in a single transaction, drastically reducing gas costs.
- Flexibility: Ideal for gaming ecosystems where a user might own thousands of fungible items (e.g., gold coins) and unique items (e.g., a rare sword).
👉 Discover efficient multi-token management strategies
Specialized and Niche Token Standards
Beyond the major categories, numerous standards address specific use cases.
ERC-918: Mineable Token Standard
This standard defines a interface for creating tokens that can be mined using a proof-of-work algorithm, similar to how Ether was originally mined.
ERC-1132: Token Locking Standard
It provides a standardized way to lock tokens within a contract for a specified period without transferring them, useful for vesting schedules or time-based commitments.
ERC-1238: Non-Transferable "Badge" Tokens
This standard is for tokens that represent achievements or memberships. These tokens are bound to an address and cannot be transferred, making them perfect for soulbound tokens (SBTs).
Standards for Composing and Managing Assets
ERC-998: Composable NFTs
This standard allows an NFT to own other NFTs and ERC-20 tokens. Transferring the parent NFT means transferring the entire hierarchy of assets it owns—like a virtual character (NFT) transferring with all its equipment (other NFTs) and currency (ERC-20).
ERC-809: Rental Standard for NFTs
This proposal outlines a standard for renting NFTs. Users can create a series of instructions to lease their unique digital assets directly from their wallet interface.
Frequently Asked Questions
What is the main difference between ERC-20 and ERC-721?
ERC-20 is for fungible, interchangeable tokens like currencies. ERC-721 is for non-fungible tokens (NFTs), where each token is unique and represents a distinct asset, like digital art or a collectible.
Why was ERC-1155 created?
ERC-1155 was created to improve efficiency and flexibility. It allows a single contract to manage an infinite number of both fungible and non-fungible token types, enabling complex ecosystems like blockchain games while significantly reducing gas costs for batch operations.
Can I still lose tokens with ERC-223?
The primary goal of ERC-223 is to prevent the accidental loss of tokens that plagues ERC-20. If you send ERC-223 tokens to a contract that does not support the standard, the transaction will fail, safeguarding your funds.
What are composable NFTs (ERC-998)?
Composable NFTs, defined by ERC-998, are NFTs that can own other assets. This means a single NFT (e.g., a virtual estate) can hold a collection of other NFTs (e.g., furniture, artwork) and fungible tokens. Transferring the main NFT transfers everything it contains.
Is ERC-777 better than ERC-20?
ERC-777 offers advanced features like hooks and operators that ERC-20 lacks, making it more powerful for complex applications. However, ERC-20's simplicity and first-mover advantage have made it the most widely supported standard.
What is a non-transferable token used for?
Non-transferable tokens, like those defined by ERC-1238, are used to represent immutable achievements, identities, or qualifications that are permanently tied to a specific wallet address. They are often called "badges" or "soulbound tokens."
Conclusion
The landscape of Ethereum token standards is vast and continually evolving. From the foundational ERC-20 and ERC-721 to the highly efficient ERC-1155 and specialized standards for renting or composing assets, each proposal serves to expand the possibilities of what can be built on the blockchain. Understanding these standards is key for developers and enthusiasts looking to navigate and innovate within the Ethereum ecosystem. As the technology matures, we can expect even more sophisticated standards to emerge, further empowering decentralized applications.