How are Cryptocurrency Token Standards Created?

The decentralization property of cryptocurrencies means there is no single entity in charge. Crypto enthusiasts can send money and perform other technological functions without fear of censorship or supervision. Still, even in this decentralized world, some rules ensure trust is maintained and transactions do not become disorderly. These rules present themselves, in part, as cryptocurrency token standards.

What are Cryptocurrency Token Standards?

Cryptocurrency token standards are rules and instructions that standardize the development of tokens on various blockchain networks. These standards dictate how the crypto token works and what it can be useful for. Before a set of rules can be accepted as a standard in the crypto token community, it must possess the following qualities:

Adoption

The token community must adopt a token standard without controversy. The standard should also be active development and maintenance within the community.

Interoperability

Tokens created with the standard should be interoperable and interchangeable across multiple wallets, exchanges, and platforms. That means that apart from being accepted within its community, the token standard should also be adopted in the general crypto community.

Ease of use and flexibility

Even though the standard itself may need to be created by technical experts, the tokens based on that standard should be easy to use and implement, even for laypeople in the crypto space. Also, the standard should be flexible enough to support a vast array of uses and should allow users to easily customize token parameters like supply, symbols, decimals, and others.

Security

A token standard should offer reasonable security and resilience to the tokens created on it. This is very important because cryptocurrencies are usually targets of various malicious attacks. Users of the standard should be confident that an inherent security flaw in the token standard system would not compromise their hard work and good intentions.

How are Cryptocurrency Standards Created?

The specific method of creating token standards differs from blockchain to blockchain. However, regardless of the difference, the creative method is usually a collaborative process where one person (or group) sees the need for a new standard and discusses it with stakeholders in the community. The stakeholders then analyze the proposed standard and decide how viable it is.

Here is a step-by-step analysis of the creative process:

Identify the need

Any community member can set the ball rolling by identifying a need for a new token standard. The need could arise due to advancing technology, increasing market demand, or emerging use cases for crypto assets. The member could collaborate with other members to confirm if the need justifies a new token standard before proceeding to the next step. Sometimes, community members might also suggest that a token standard be updated instead of creating a new one.

Gather stakeholders

Once a need has been identified, stakeholders within the crypto community are gathered to discuss how the standard should be developed. These stakeholders are usually heavy investors, industry experts, and blockchain developers from the community. In some cases, blockchain experts from other communities may be invited to weigh in.

Define the scope

Once the stakeholders have been gathered, they then define the scope of the new or updated standard. This involves specifying its technical functions, guidelines, and parameters. After that, they work together to draft the token standard and ensure it meets the needs and requirements of the blockchain community. This may involve a series of meetings and back-and-forth sessions to ensure that they consider every variable.

Test the standard

Before releasing the standard to the public, blockchain community members usually test the new token standard. They do this by running simulations on different blockchain-based applications and making necessary adjustments. This helps refine and polish the token standard and ensures it reaches its optimal best.

Release to the public

Once the token standard is released to the public, its adoption rate depends on its usefulness and ease of use. In most cases, developers and entrepreneurs are the first to adopt the standard. Other users may pile on if they see the standard gradually gaining mass adoption within the community.

Token Standards on the Ethereum Blockchain

Ethereum is the most popular smart contract platform. As such, it has housed many token standards, each with its functions and peculiarities. The standards created on Ethereum have also served as templates for token standards on other smart contract platforms.

Examples of token standards on Ethereum are ERC-20, ERC-721, ERC-1155, ERC-4907, and others. This article offers a deeper dive into the main Ethereum token standards - The main Ethereum ERC Token Standards.

Token Standards on BNBChain

Binance is one of the largest cryptocurrency exchanges in the world and has maintained top status for years. As part of its crypto initiatives, it has created several token standards that remain relevant in the crypto world today. The three prominent ones are:

BEP-2

This is the token standard for tokens on the BNB Beacon Chain. These tokens are EVM-compatible and are more suitable for staking and governance functions in the BNB ecosystem. The BNB Beacon Chain is also a better option for cross-chain communication between the BNB Chain and other EVM-compatible blockchains.

BEP-20

This is the token standard for tokens issued on the BNB smart chain. It is an extension of the ERC-20 token standard on the BNB chain and is thus EVM-compatible. This token standard was created to specifically boost smart contract functionality on the Binance chain (as opposed to the BEP-2 standard, which is optimized for ultra-fast trading).

BEP-721

BEP-721 is the BNB Smart Chain’s token standard for non-fungible tokens. A similar token standard also exists on the Ethereum blockchain as ERC-721. This standard can be used to issue digital art, collectibles, real estate, gaming items, and other unique items. Examples of BEP-721 tokens are Binance Collectibles (BNB-Collectibles), MOBOX, and My Neighbour Alice (ALICE), among others.

Token Standards on Tron

Tron is a blockchain platform that supports creating and deploying decentralized applications. It was established in 2017 by Justin Sun and remains relevant as one of the top and cheapest smart contract platforms on the crypto scene. There are four token standards on the Tron network. They are:

TRC-10

This token standard is designed for local usage within the Tron blockchain. It demands cheaper transaction fees than the other token standards but takes up more bandwidth. TRC-10 tokens can be created with up to 16 decimal places without prior programming knowledge. TRX, BTT, and WIN are examples of TRC-10 tokens.

TRC-20

This is a more advanced token standard similar to the ERC-20 standard on Ethereum. It is the token standard for smart contract development on Tron. Unlike TRC-10 tokens, TRC-20 tokens are compatible with the Tron Virtual Machine (a virtual machine designed to replicate the EVM on Tron). The tokens created under this standard are divisible up to 18 decimal places. Examples of TRC-20 tokens are JST and SUN.

TRC-721

This token standard allows Tron users to create and deploy NFTs on the Tron network. Examples are ANJ NFTs and CryptoKitties.

TRC-1400

This is the equivalent of the ERC-1400 token system on the Tron blockchain. It allows community users to create and manage security tokens. Security tokens are crypto assets that represent ownership of real-world assets like stocks and bonds. Examples are the Tron Security Token (TST), BitForex Tokenized Fund (BTF), and Emergence Coin (EMR).

Other Token Standards

Neo Token Standards

The NEO blockchain has three distinct token standards. NEP-5 is the primary token standard and is used to create fungible tokens. NEP-11 is the non-fungible token standard similar to ERC-721 on Ethereum. And NEP-17 is the token standard that supports smart contracts on the NEO blockchain.

SPL Token Standards

SPL stands for Solana Program Library and is the technical term for tokens issued on the Solana blockchain. SPL Token is the main token standard and allows for the creation of fungible tokens. Other token standards are the SPL NFT standard (NFTs) and the SPL Memes standard (meme tokens).

Tezos Token Standards

The Tezos blockchain has four distinct token standards. They are:

• The FA1.2: Short for Financial Authority 1.2, this standard is similar to ERC-20 and allows fungible tokens to be freely created on the network. It is also a payment, rewards, and governance token standard. An example is the tzBTC token.
• The FA2: This is similar to the ERC-1155 standard and allows multiple token types to be created within the same smart contract. An example is the StakerDAO token.
• TZIP-12: This is the NFT token standard on Tezos. An example is the Kalamint NFT, an NFT marketplace on Tezos.
• TZIP-16: This is the security token standard on Tezos, similar to TRC-1400 on Tron. An example is the Elevated Returns token.

Conclusion

Cryptocurrency token standards are essential for the development of the blockchain ecosystem. They ensure that crypto technology keeps up with the latest trends and enforce trust and order within the system. As the space grows and more platforms are added, more token standards will likely emerge.