You have probably heard about ERC-20 tokens, especially if you were following the crypto space during the 2017 ICO boom.
However, there are many other Ethereum token standards besides ERC-20, such as ERC-721 and ERC-223, that provide additional use-cases for coins.
In this post, as part of our journey through the Ethereum blockchain, we are going to explore the most important ERC token standards.
What Does ‘ERC’ Mean?
ERC stands for Ethereum Request for Comment, which is used for suggesting improvements for tokens and other parts of the Ethereum ecosystem.
After submitting an ERC, the Ethereum community will assess it and decide whether to accept or reject the suggestion.
Upon getting a greenlight, the ERC will get formalized into an Ethereum Improvement Proposal (EIP).
While ERCs are mostly initial and informal proposals, EIPs are always audited and evaluated by core Ethereum developers.
With that said, the phrase “ERC” is widely known in the cryptocurrency community as a standard for tokens on the Ethereum network.
In short, a token standard is used to define the data and the functions of each token that implements it. Standardizing tokens makes it easier for creators to issue coins and integrate it with applications.
ERC-20 is the most popular token standard in the Ethereum ecosystem and also in the whole cryptocurrency industry.
Proposed by Ethereum co-founder Vitalik Buterin in June 2015, ERC-20 is a simple interface that allows developers to create their tokens on top of the Ethereum blockchain and integrate it with third-party applications (e.g., wallets and exchanges).
In addition to allowing creators to use simple functions like limiting their coins’ total supply, there’s straightforward interaction between ERC-20 tokens, decentralized applications (DApps), and smart contracts.
It’s important to highlight that ERC-20 tokens are fungible assets. Like a hundred-dollar bill or a standard gold bar, fungible tokens are identical assets with equal-value units.
Since it’s easy to create an ERC-20 token, most crypto projects used the standard to issue their native coins and sell them to contributors during the 2017 ICO boom.
As a result, ERC-20 is the crypto industry’s most widely accepted token standard that is supported by most digital asset wallets, exchanges (including AAX), and other services.
ERC-223 is a fungible token standard in the Ethereum ecosystem with the primary goal of solving some of ERC-20’s issues.
While ERC-20 is very popular among crypto projects and users alike, it allows people to send cryptocurrency to smart contracts instead of their wallets.
As a result, some users have lost their funds due to contract failure or some other reason.
To fix this issue, ERC-223 has a feature that alerts users automatically in cases when they accidentally send their tokens to a smart contract. Such transactions are auto-canceled, allowing users to recover their funds (but still pay the gas fees).
While it is backward compatible with ERC-20 coins, ERC-223 features lower gas costs than its predecessor.
However, despite its benefits, ERC-223 failed to get adopted by the Ethereum community, and crypto projects are yet to implement the token standard.
Contrary to ERC-20 and ERC-223, ERC-721 is a non-fungible token (NFT) standard.
Instead of identical coins, each token here is unique, featuring its own identifier for easy verification via the blockchain.
While fungible tokens have similar features as standard gold bars or same-value US dollar bills, ERC-721 coins are more like artwork or other (complex) hand-crafted items where every piece is unique and different in some way than the others.
While they have multiple applications, NFTs’ most popular use-cases are in blockchain gaming solutions.
With non-fungible tokens, blockchain gamers can collect, own, and trade unique in-game items, such as weapons, characters, clothes, mounts, and vehicles.
Furthermore, the ERC-721 token standard allows creators to integrate NFTs in multiple blockchain games and apps, allowing gamers to use their digital collectibles wherever they play.
ERC-1155 is a hybrid token standard that allows developers to create unlimited fungible and non-fungible coins under one smart contract.
While developers have to create a new smart contract for each NFT with ERC-721, they only have to deploy one for both non-fungible and fungible tokens with ERC-1155, cutting the development time and minimizing the resources creators use.
In blockchain gaming, this allows cryptocurrency projects to use a single smart contract to issue their in-game currency as a fungible token while enabling users to collect NFT items during their participation in the game.