In cryptocurrency, a token standard represents a set of rules that determine the way in which a crypto token is created.
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Token Standards in cryptocurrency are protocols and rules for token creation.
These standards ensure interoperability, consistency, and compatibility amongst all tokens that operate under a given blockchain.
ERC represents all Ethereum tokens; BRC represents Bitcoin tokens; TRC represents TRON tokens.
ERC-20 is the standard for fungible tokens on Ethereum while ERC-721 is the standard for non-fungible tokens on Ethereum.
What Is a Token Standard?
In cryptocurrency, a Token Standard represents a particular set of guidelines and procedures used to construct tokens. These standards are responsible for all crypto tokens, which operate atop an existing blockchain network, mostly the Ethereum blockchain network.
Token Standards add three benefits to the crypto ecosystem:
You’ll notice in the next section that most crypto token formats have the letters “RC” in their acronyms, such as ERC-20 and TRC-10. “RC” stands for “Request for Comment.” RCs offer a way for developers to obtain feedback and reach consensus on how a blockchain should operate.
Other blockchains, like the Binance Smart Chain, use “EPs”, for instance, BEP-20. Here, “EP” stands for ‘Enhancement Proposal’, which, like RCs, are proposals aimed at making the Binance blockchain better.
Ethereum’s popular ERC standard tokens are sometimes referred to as “EIP” tokens, which means Ethereum Improvement Proposal.
Let’s now take a look at popular token standards!
Token Standards by Blockchain
|Ethereum||ERC-20||Technical standard for fungible tokens utilizing Ethereum.|
|ERC-777||Extends ERC-20 functionality to address limitations. Implements 'Hooks' for combined token sending and contract notification.|
|ERC-721||Standard for NFTs on Ethereum. Requires new smart contract for each distinct token type.|
|ERC-1155||Manages infinite NFTs in a contract. Allows unlimited tokens within a single contract.|
|Bitcoin||BRC-20||Modelled after Ethereum's ERC-20 token.|
|BRC-721||Smart-contract-based NFTs on BTC. Experimental stage.|
|Binance||BEP-20||Fungible token standard.|
|BEP-2||Non-fungible token standard.|
|TRON||TRC-10||Basic standard for TRON tokens. Analogous to ERC-20.|
|TRC-20||Complex, smart-contract-based. Offers logic beyond TRC-10.|
|TRC-721||Standard for issuing NFTs on the TRON network.|
|TRC-1155||Represents and manages multiple token types in one contract. Enhances development efficiency.|
|Solana||SPL Token||Token standard for Solana. Equivalent to ERC-20 on Ethereum.|
Crypto Coin Vs Token
So what standards do bitcoin (BTC) and ether (ETH) use?
None! Bitcoin and ether, like Solana (SOL) and Cardano (ADA), are coins, not tokens. Coins and tokens are fundamentally different types of digital assets.
Tokens power decentralized applications (dApps); coins power blockchains. Cryptocurrency coins are primarily intended for transactions, whereas tokens possess specific use cases and features within specialized apps.
For instance, a platform running atop an existing blockchain may create tokens for purposes like covering transaction fees, facilitating trade on a marketplace, providing discounts/rewards, or engaging in decision-making inside a dApp.
Three popular categories of crypto tokens include:
- Utility tokens
- Security tokens
- Governance tokens
Generally speaking, coins are used for staking, which helps to secure blockchain networks.
There are many more tokens than coins available to trade. However, you’ll need a self-custody wallet to access most of them as centralized exchanges typically only offer a handful of tokens.
Fungible vs Non-Fungible
Crypto token standards are primarily classified as fungible or non-fungible.
Fungible simply means interchangeable. US fiat currency is fungible because every single US Dollar has the same exact value.
Non-fungible means unique. For example, all paintings by Monet are not valued the same – each one is unique and has its own value. In crypto, non-fungible tokens represent all tokens that have unique value.
Digital art represents the most popular variety of blockchain-based NFTs today. Bored Ape Yacht Club and CryptoPunks are the two most popular NFT collections in 2023.
Ethereum token standards are the most popular in the world. ERC-20, Ethreum’s standard for fungible tokens, has issued more tokens than any other blockchain.
ERC represents the token standards for the Ethereum network. ERC-20 covers all fungible tokens on Ethereum; ERC-721 covers all non-fungible tokens (NFTs) and ERC-1155 allows for both types with a single contract.
Ethereum’s ERC-20 tokens allow for many benefits, including interoperability, consistency, and compatibility.