Ethereum tokens are all exactly alike. Except for when they’re absolutely not.
Ethereum ERC token standards allow Ethereum-based tokens to have different characteristics. The standards also allow developers to understand how certain token types will interact, as well as which wallets to use and which services are compatible.
So, what are Ethereum ERC token standards?
What Does ERC Mean?
ERC stands for Ethereum Request for Comments. ERC is a technical standard for Ethereum-based token. Anyone can create an ERC, just as anyone can create an Ethereum-based token. However, it won’t automatically attract interest, especially if it isn’t innovative or offering a different take on an existing ERC.
You might have encountered the term ERC-20 when dealing with Ethereum. The ERC-20 token standard describes the core functionality of the majority of Ethereum tokens. You can read more about ERC-20 below.
There are a lot of ERCs. Thousands, in fact. You don’t need to know about all of them. You only need to know about four or five important ERCs.
ERC-20: The “Original”
The most important Ethereum token standard is ERC-20. ERC-20 is the most well-known and widespread token standard found on the Ethereum blockchain. It is the token standard first proposed by Ethereum co-founder Vitalik Buterin back in 2015. Furthermore, most Ethereum-based tokens on the Ethereum blockchain are ERC-20 compliant.
You have likely encountered many of the major ERC-20 tokens, too. OmiseGO (OMG), Binance Coin (BNB), 0x (ZRX), and Basic Attention Token (BAT) are all examples of popular ERC-20 tokens.
The ERC-20 technical standard defines six different functions that an Ethereum ERC-20 token must implement to meet the standard.
- totalSupply(): the total supply of the specific ERC-20 token
- balanceOf(): keeps track of the token balance in each Ethereum wallet
- transfer(): can send tokens to one wallet or distribute to multiple wallets on token creation
- transferFrom(): allows token holders to send tokens to other Ethereum wallets
- approve(): can “approve” other accounts to withdraw a certain amount of tokens from an account
- allowance(): after approve() is used, allowance() checks the number of tokens the approved account can withdraw
ERC-20 tokens are easy to create. That’s why so many ICOs use ERC-20-based tokens. The complexity comes with their implementation within their respective ecosystem.
ERC-223: Fixes Faults, Reduces Gas Fee
ERC-20 is by far the most popular ERC standard, but it isn’t without fault. If you send your ERC-20 tokens to a smart contract address rather than an Ethereum wallet address, they’re gone.
The ERC-223 standard, realizing that people are human and make the occasional mistake, fixes that issue. You can send an ERC-223-based token to a smart contract address or wallet, with the same result. Better still, ERC-223 produces an error message if you attempt an invalid transfer, saving you time and lost crypto in the process.
ERC-223 is completely backward compatible with ERC-20 tokens. As ERC-223 tokens also use around 50% less Gas than an ERC-20 transaction, ERC-223 tokens could see wider-adoption in the future. However, the lack of widespread wallet support for ERC-223 is holding the standard back.
ERC-721 is the standard for non-fungible Ethereum-based tokens. Most cryptocurrency tokens are fungible, meaning they break down into smaller pieces. This helps them work as a form of currency. Conversely, ERC-721 tokens are non-fungible. They do not break down into smaller parts and are not suited for use as a currency.
In that, non-fungible ERC-721 tokens are used to represent crypto-collectibles. A crypto-collectible is a unique or rare digital asset tied to an ERC-721 token. The value of the crypto-collectible can change, but the asset itself cannot change because of its inextricable link to the Ethereum blockchain.
An ERC-721 token has other uses outside of crypto-collectibles. In the future, an ERC-721 non-fungible token could represent a car, a house, artwork, a rare bottle of wine, or otherwise.
ERC-777: Builds Further Efficiency
ERC-777 attempts to improve on both ERC-20 and ERC-223. How? ERC-777 is about efficiency. It includes the ERC-223 fixes for the issues found in ERC-20 (token loss, higher transaction costs), and builds on that foundation.
ERC-777 introduces a new concept, known as “operators.” An operator reduces the number of transactions needed to authorize a smart contract to spend tokens from your account from two to one. It doesn’t sound much, but it opens up smart contracts and third-party apps to gain permission for quicker operations, something almost all Ethereum dApps will benefit from.
ERC-777 operators will also allow smart contract or dApp developers to manage the Gas cost to create a cheaper, more friendly user experience.
However, ERC-777 doesn’t take all the credit.
The operators are enabled by another smart contract, ERC-820. The ERC-820 standard “defines a universal registry smart contract where any address (a contract or regular account) can register.” This means you can use the ERC-820 contract in conjunction with ERC-777 to make sure the smart contract or transaction address you are about to send to is legitimate and can accept your tokens.
The common Ethereum ERC-20 standard investigated the introduction of this feature in EIP-165. (An EIP is an Ethereum Improvement Proposal. The Ethereum community can propose and detail improvements to Ethereum using an EIP.)
ERC-1155: A Multi-Token Smart Contract Standard
ERC-1155 is a very interesting development in that it allows the creation of fungible, semi-fungible, and non-fungible tokens using a single Ethereum standard.
ERC-1155 provides the framework for all these different types of token to exist together in a single smart contract. Instead of having to split the trade of a crypto-collectible and its payment into two transactions or use an escrow service, both parties can use the same smart contract.
ERC-1400: Tokenize Existing Security
One of the most hotly anticipated developments for blockchain technology the tokenization of existing securities, be that a stock, bond, or otherwise. Furthermore, new security tokens are becoming a popular and secure method of investing in new cryptocurrency projects while resolving many of the issues plaguing a traditional ICO. (What is an STO and will it replace the ICO?)
The introduction and development of ERC-1400 are making that shift possible.
ERC-1400 combines several other ERCs to create a strong library of security token standards. Working alongside ERC-1400 are:
- ERC-1594: Provides the core functionality for the security tokens, allowing off-blockchain data integration that extends to authorizing asset transfers, and more.
- ERC-1410: Attaches transparency features to individual accounts. For instance, a user’s balance can also display their voting privileges, outstanding time locks before token distribution, and other important information.
- ERC-1643: Securities come with documents, and tokenized securities are no different. ERC-1643 allows for the attachment of notarized documentation alongside tokenized securities, as well the ability to notify any holders of document updates.
- ERC-1644: ERC-1644 provides the ERC-1400 security token library with a method of control. In this context, control refers to the execution of court orders, the retrieval of funds lost through fraudulent activity, and even lost private keys.
Ethereum Token Standards Will Continue to Evolve
Ethereum token standards aren’t set in stone. That’s where the EIPs come into play. The Ethereum Improvement Proposals allow the extension of and addition too any Ethereum ERC standard. The ERC standards also illustrate how innovative and extensive the Ethereum platform is.
Want to learn more about Ethereum? Check out the Blocks Decoded Ethereum coin study!