Cryptocurrencies are digital assets that exist on the blockchain. While there are thousands of different cryptocurrencies available in the market, most of them share similar underlying token standards.
Token standards define some of the key functionalities and properties of blockchain tokens – such as token name, token symbol, token supply, token price, transferability between accounts, and more. Popular token standards include ERC-20, BEP-20, BEP 2 , ERC-721 , ERC777 , ERC-1155 , ERC4626 , and wrapped tokens. This article provides an overview of these token standards to help you understand their differences and similarities.
Why are crypto token standards important?
Crypto token standards are important as they serve as protocols and guidelines to allow the stable functioning of cryptocurrency tokens. They play an essential role in organizing data and governing the interactions between smart contracts, decentralized applications, and other digital assets.
Token standards are synonymous with similar concepts such as token transfer protocol, meaning they provide a blueprint for allowing different blockchain technologies and tokens to communicate with each other seamlessly.
As more types of tokens and protocols emerge, further discipline is required to ensure the success of blockchain technology – making crypto token standards all the more important for facilitating this congruence.
Common Token Standards in Crypto and DeFi
With the rise of blockchain technology, developers have created common token standards to facilitate interoperability and enable transparency. In the crypto and Decentralized Finance (DeFi) space, Ethereum‘s ERC20 has become an established leader in token standardization. Currencies like Bitcoin and Litecoin also have token standards for transferring value on their networks.
Other popular standards include ERC721, a non-fungible token meant for digital collectibles and assets; ERC1155, a multi-token standard; ERC1337, a stablecoin standard; and ERC1400, a security token standard. These common token standards offer developers flexibility and added compatibility when creating new projects and applications. By operating within agreed-upon rulesets, all network participants can safely interact with them with greater security as compared to custom tokens built from scratch.
ERC20 is the most popular standard for Ethereum tokens and relates to the ability to send and receive tokens within the Ethereum system. It is named an ERC for a reason – it stands for “Ethereum Request for Comment” and defines a set of rules that all ERC20 tokens must follow to be compatible with the Ethereum blockchain. This includes functions such as total supply, the balance of an address, transfer from one address to another, and approval of allowances from one address to another. Since its inception in 2015, this standard has encouraged token creation, decentralized trading platforms, and projects with complex token economies such as non-fungible assets.
Examples of ERC20 tokens are Uniswap (UNI), Chainlink (LINK), and Aave (AAVE).
BEP20 is the Binance Chain version of ERC20 token transfers, with some distinct differences that benefit both developers and users alike. The main difference between BEP20 and its predecessor is the speed of the transactions due to Binance‘s expertise in blockchain technology. Transactions are almost instantaneous, providing an extra layer of convenience and security for users. Additionally, it has given developers more flexibility when creating DeFi protocols as they can now use one unified protocol across various blockchains such as Ethereum, Binance Smart Chain, and more without having to learn a new platform. With its innovative features such as improved security, accelerated time-to-market development, and enhanced usability, it is clear why more developers have been adopting BEP20 over ERC20.
Examples of BEP20 tokens are Binance Coin (BNB), Wrapped Bitcoin (WBTC), and PancakeSwap (CAKE).
BEP2 is a technical standard introduced to make the issuance and implementation of tokens on the BNB Beacon Chain simpler and more efficient. It contributes to developing an ecosystem in which tokens can be circulated freely while assuring maximum efficiency, reliability, and fairness. This standard defines a set of universal rules that all tokens must adhere to, allowing them to adapt seamlessly into the existing BNB Beacon Chain network with minimal effort. With this technology, token holders now have greater control over their tokens, allowing them to transfer them easily in the BNB ecosystem.
Examples of BEP2 tokens are STEPN (GMT), Trust wallet token (TWT), and BEP2 PancskakeSwap (CAKE).
ERC721 is an innovative smart contract standard that provides a foundation for the representation of non-fungible tokens (NFTs). Unlike standard ERC20 tokens, each ERC721 token is unique and can hold its own set of data which can vary in terms of type and quantity from other tokens. By splitting the ERC721 standard into numerous contracts, users can create more complex and secure NFTs as well as implement certain optional features, if required. That said, this foundation has allowed developers to seek further integration possibilities with new and existing applications using blockchain technology.
Examples of ERC 721 tokens are CryptoKitties, NBA Top Shot, and Bored Ape Yacht Club (BAYC).
ERC1155 is a much-applauded multi-token standard for Ethereum smart contracts. Unlike other standards, it can be used to create both fungible and non-fungible tokens with ease. It offers flexibility by targeting several asset types and brings development efficiency as its code base is standardized for different transactions with one set of rules.
ERC1155 has been growing rapidly in popularity due to the way it simplifies token creation and management; not to mention, the increased security that comes from having a unified, secure code base at the foundation. All in all, this new standard promises to revolutionize the way blockchain technology can be used across industries thanks to its all-in-one approach.
Examples of ERC 1155 tokens are Enjin Coin (ENJ) and Aavegotchi (GHST).
ERC 777 is a significant development in token trading technology. It facilitates interactions between tokens and Ether by creating a common platform, which allows users to view the value of other tokens held in their wallets. This standard revolutionizes existing fungible token models and provides a more secure and efficient way to implement the token exchange. This could lead to an increase in the number of exchanges taking place, and thereby potentially give more control over data management and storage services on the blockchain. Overall, ERC 777 has made transactions over Ethereum faster, easier, and more reliable.
Examples of ERC777 tokens are Bancor (BNT), Loopring (LRC), and MakerDAO (MKR).
ERC4626 is a revolutionary new standard for blockchain domain names that offer improved compatibility with Ethereum Name Service (ENS). It has been developed as a step forward from existing ENS specifications and builds on existing Ethereum-based technologies to create a unique solution that increases the scalability, interoperability, and usability of domains and wallets. With this new standard, developers can more easily build projects that rely on the power of ENS, and users will benefit from enhanced functionality when creating their own blockchain identities. As the usage of blockchain technology continues to become more widespread within our society, ERC4626 provides an exciting opportunity to make this process even easier.
Examples of ERC4626 tokens are Unstoppable Domains (UD), ENSMaketplace (ENSM), and FTA tokens.
Wrapped tokens provide an interesting solution to the dilemma of how to transfer assets between different blockchains. This process, known as token wrapping, involves the smart contract issuance of a token equivalent to the original asset, allowing it to be used on a non-native blockchain. Token washing is in essence the exchange of one token for another token at a fixed rate – accomplished by creating a smart contract that allows the sender’s tokens to be exchanged for an equal amount of the new tokens. Wrapping tokens provides flexibility when transferring digital assets from one platform to another without having to worry about compatibility and complexity issues.
Examples of wrapped tokens are Wrapped Bitcoin (WBTC), Wrapped Ether (WETH), and Wrapped Stellar Lumens (WSL).
There are many standards for tokens in the cryptocurrency world, each with its purpose. The most popular standard is ERC20, which defines a set of rules that all ERC20 tokens must follow. BEP20 is the Binance Chain version of ERC20, with some minor differences. Another common standard is ERC721, which allows each token to be unique. These are just a few of the many crypto token standards out there. With so many options available, it’s important to choose the right one for your needs.