Ethereum Token Standards
As we dive deeper into Ethereum, one of the most capable networks in the blockchain world, we come across ERC-20, ERC-721, ERC-1155, ERC-4626 and some other token standards. It’s normal to be confused about what each of the Ethereum token standards does and why it’s important. We wrote down which token was created for what purpose, to clear up the question marks.
You can think of Ethereum as a computer that covers the whole world. This computer stores and shares information around a network of anonymous and trustless nodes. Based on a resilient economic structure that chooses the path of consensus, the Ethereum network functions as a neutral network that anyone can build independently and in collaboration with the community.
Application Programming Interfaces (API’s) are a mechanism designed by developers that communicate with programs. For this reason, the inner workings of API’s are camouflaged as much as possible. Communication is maximally simplified and streamlined.
Ethereum APIs have many uses. For example; There is an API behind every transaction that takes place in the chain, such as operating protocols in an integrated manner, transferring assets, creating customizable investments, borrowing, lending and collateralizing assets, or these actions are carried out directly thanks to an API.
You can actually think of tokens as bits of code that fit different types of tokens into an API blueprint. If the code is tied to a specific API blueprint through a smart contract, it is a type of token.
Let’s try to explain the most popular of the Ethereum-based token standards.
ERC-20 tokens are the most basic token standard, encompassing the vast majority of tokens available today. Governance tokens, stablecoins, etc. this token was created in the standard (ETH is not an ERC-20 token). To create an ERC-20, a developer needs to create code to execute for all of the following methods and events. All ERC-20 standard tokens support these functions. A different developer has the assurance that they will have them when using any ERC-20 standard token.
ERC-721 tokens are commonly referred to as NFT (Qualified Intellectual Property). These tokens represent unique or identifiable items within a collection. This includes profile photos, collectibles, real estate, etc. Tokens are also included in this class.
ERC-1155 tokens combine features of both ERC-20 and ERC-721 tokens, providing a single interface that manages a combination of these token types. The ERC-1155 can be used as a more modern alternative to the ERC-20 or ERC-721 and offers unique features optimized specifically for digital games.
ERC-4626 is the newest token standard designed for yield farming vaults. It provides a common interface for ERC-20 tokens deposited in a vault to earn returns.
ERC-777 is a configurable but rarely used token standard. It provides updates to the ERC-20, allowing developers to add code that works when tokens are sent or received. It is an extremely rare type of token.
The computer that covers the whole world, Ethereum, is just an infrastructure. Local ETH, ERC-20, 721, 777, 1155, 4626… What we build on it is up to us. Basically, the more token standards we produce, the further we can go. So we can get even closer to programmable money.
