What Are Token Standards? How Did They Evolve?
The unique features of token mechanics can be set in smart contracts. The mechanics only work within a system of similar tokens. For example, unique tokens used within gaming apps cannot be used on universal marketplaces seeing as the latter will not realize the proposed smart contracts without implementing a common logic.
As such, Ethereum standards were introduced to solve this problem. Thus, the creators of dApp games and apps put in all the necessary data, which is needed to use specific tokens based on a particular standard, into the software source code.
Ethereum is an open project. So tokens can be handled using the Ethereum Request for Comments, which allows any user to propose innovations. And, if the proposal somehow improves the technology, it will indeed be implemented, supplementing the list of official Ethereum standards.
Main Token Standards for Ethereum
The key characteristic used in classifying Ethereum token standards is their fungibility. According to this parameter, they can be divided into the following types:
- Fungible: a group of fungible assets that are equal so that they can be used as currency.
- Semi-fungible: a semi-fungible group of tokens that are a little different but still unique. Like in the case of theater tickets, the price tag is the same, but the seats are different.
- Non-fungible: a group of non-fungible tokenized objects that are created in single copies.
Features of Main ERC Standards
ERC standards can be conditionally divided into two large groups:
- Improvements to the “core” ERC-20 standard
- Standards for the creation of unique NFT tokens
Below are the most common standards and their features.
ERC-20
Vitalik Buterin created this standard in 2015. It’s the most popular one that has been created and it refers to fungible tokens. These tokens have found a wide range of applications in various initial offerings, where terms like ICO (initial coin offering) and IEO (initial exchange offering) are used in the public offerings of tokenized objects.
The following features characterize ERC-20:
- fungible type;
- availability of stock tickers;
- divisibility property, i.e., it can be represented by fractional values;
- mandatory presence of total supply – the greatest possible number of issued tokens.
ERC-223
An improved version of ERC-20, which prevents the transaction of little-known contracts. Assets will be returned to senders if smart contracts do not have a token allowance feature.
ERC-721
A widespread standard by which unique tokens are created. An example of the standard is Decentraland’s Earth or Binance Collectibles. The standard was built in 2017 as EIP, authored by Dieter Shirley.
The main features are:
- operation with non-fungible tokens
- no stock tickers
- indivisibility
- single copies only
ERC-777
Considered an improved version of ERC-20, this standard is characterized by the following advantages:
- only one transaction is used to exchange tokens (in the case of ERC-20, two transactions are required);
- automatic transaction cancellation in case of incompatibility between contracts;
- option to mark unsafe addresses;
- appointment of operators (those who have rights to transfer tokens from other addresses);
- higher speed of financial transactions.
ERC-1155
Enjin developed the ERC-1155 standard. It is a project to simplify Ethereum-based game development. Though it was originally considered a gaming standard, it can be used for other purposes as well.
The key features of ERC-1155 are:
- the ability to issue multiple tokens within a single contract;
- concurrent presence of fungible and non-fungible tokens properties in the same contracts;
- atomic swaps support;
- batch transfers support;
- no need for block expiry for some transactions.
Atomic swaps raise numerous questions among users. One of the main reasons why blockchain is not universally accepted is the lack of ability to quickly and efficiently (in terms of commission) exchange tokens for other tokens. Atomic swaps are precisely the solution to this problem. This technology allows the decentralized exchange of various cryptocurrencies.
Atomic swaps are also used for batch transfers, meaning the exchange of multiple tokenized objects within a single smart contract. Although batch transactions take the same amount of time, they provide commission savings. For this purpose, multiple transfers are recorded as a single transaction.
ERC-1155 holds a very similar functionality to ERC-875, which appeared shortly before it. The only difference between the 1155-version is the support for fungible tokens.
ERC-865
This standard applies a similar principle to ERC-20, with the only difference being the use of tokens themselves, rather than “gas” as a fee. As the “gas” fee payment system is quite complicated (the fee amount is often unpredictable), the new standard has simplified Ethereum transactions for users.
