What Are the Main Ethereum ERC Token Standards?

Ethereum introduced the concept of blockchain-based decentralized applications and protocols. Although Ethereum does have its own ‘coin’ called ETH, which can be used the same ways as BTC, its primary use case is to serve as gas to power transactions and operations on apps and protocols built on the network. Developers of these apps can create in-app currencies or digital assets that are stored on Ethereum blockchain. These are what we call tokens, and they must correspond to certain ‘rules’ called ERC standards.

What Are the Main Ethereum ERC Token Standards?

Token standards are a set of rules that allow the development of cryptocurrency tokens on different blockchain protocols. These standards represent a guide for the creation, issuance, and deployment of new tokens on the underlying blockchain. In the case of Ethereum, these standards are called ERC (Ethereum Request for Comments), and they set the rules for the tokens that can be created on Ethereum.
Each ERC token is identified by a serial number, which corresponds to the number of ‘request for comments’ that proposed these standards. In addition to the three ERC standards that are most widely used on Ethereum, there is another new, very interesting standard to follow:

1.ERC-20: First implemented in 2015, ERC-20 is the token standard that allows developers to create fungible tokens for their Ethereum-based applications or protocols. ‘Fungible’ means divisible and non-unique. For instance, fiat currencies like the dollar are fungible, as well as BTC (1 BTC is worth 1 BTC, no matter where it is issued).
ERC-20 tokens are most commonly developed by organizations or tech-focused companies. The tokens that are created by using ERC-20 are interoperable with each other and with compatible services of all the Ethereum ecosystem. All of this makes it easier for community members and businesses to adopt and use them on a wide range of applications, because everyone can create their own token or digital asset without having to program them from scratch.
It is important to underline that, although ERC-20 tokens can be easily transferred to a multitude of applications, they are not held by accounts. The tokens only exist inside a contract, which is like a self-contained database. So, the users need a wallet that runs on the Ethereum blockchain in order to ‘see’ their ERC-20 token balance;

2.ERC-721: Unlike the ERC-20s, ERC-721 is the token standard that allows developers to create non-fungible tokens (NFTs) - ‘Non-fungible’ means that each token possess a unique value and act as verifiably unique digital objects that cannot be interchanged with each other like ERC20 tokens.
ERC-721 tokens are often utilized to represent ownership on the blockchain of many items, such as contracts for physical assets, digital collectables, and digital art. In addition, they are not exchangeable for another because of their unique specifications. In a nutshell, the ERC-721 standard was created to satisfy the need to give uniqueness to the tokens of the Ethereum ecosystem.

3.ERC-1155: By combining the best aspects of the first two standards that are listed above, ERC-1155 is the token standard that allows developers to create both, fungible and non-fungible tokens, and introduces the innovation of being able to create semi-fungible tokens.
ERC-1155 tokens are utilized mostly for developing NFT games, as a single contract can be created to support multiple types of individually configurable tokens. This type of contract significantly reduces the complexity of the token creation process, since an NFT game would require a large number of assets circulating within the system (which can be objects to be collected by players).

4.ERC-4907: Defined as the rentable non-fungible token standard, ERC-4907 takes NFT ownership to a more advanced level, as it is the first to automatically withdraw usage rights upon expiration. With the ERC-4907 standard, the renter can complete particular operations with a leased NFT but cannot transfer the asset to a third party or assume complete control. This is an important innovation, because it could improve the performance of both the NFT owner and the tenant by giving the NTF itself more flexibility.

What Is the Process of Creating ERC Standards?

The Ethereum ecosystem is on the way to becoming decentralized, but it still needs a core of developers to set the rules, make calls for upgrades, and set standards. In theory, anyone can create an ERC token. However, before doing this, it is required to go through the process of an Ethereum Improvement Proposal (EIP), which is a document that includes the proposed features and processes for the Ethereum blockchain network. Once the proposal has been submitted, it is discussed and voted on to either reject or start its implementation. When this process is approved and completed, the initial document becomes an ERC standard that other developers can use to create their own tokens.
For each type of ERC token, there are precise primary functions to be implemented, which vary according to the purpose for which they were created. Taking ERC-20 tokens as an example, the functions are as follows:

• TotalSupply: Provides information about the total token supply;
• BalanceOf: Provides account balance of the owner’s account;
• Transfer: Executes transfers of a specified number of tokens to a specified address;
• TransferFrom: Executes transfers of a specified number of tokens from a specified address;
• Approve: Allow a spender to withdraw a set number of tokens from a specified account;
• Allowance: Returns a set number of tokens from a spender to the owner.

The functions above are mandatory. In addition, there are other optional ones, which are used to define the characteristics of a new token, such as giving it a human-readable name, setting a symbol, and specifying the divisibility of the token.

Use Cases & Real Applications

Since their initial implementation, ERC tokens have been used for different purposes and have contributed to the growth of different use cases and applications. Below are listed some use cases by token type.

• Stablecoins: These tokens pegged to fiat currencies often use the ERC-20 token standard. Since this standard has become popular, it has generated a significant network effect. Crypto users can have confidence that any stablecoin created using the ERC-20 standard will interoperate with the hundreds of other ERC-20 tokens and those services that already accept ERC-20 tokens. As of today, most Dapps (Decentralized Applications) accept ERC-20 stablecoins, as well as all centralized services, such as crypto exchanges.

• Utility tokens: These tokens are the most common types of tokens in the crypto market. They are used to obtain a specific service and meet different use cases, such as being the gas for various applications, giving the right to vote to users of a service, or being used to pay commissions in a DApp. As of today, most of the utility tokens in circulation are, or have been, ERC-20s (there are cases where, subsequently, some of the tokens have moved onto another blockchain).

• CryptoPunks: Collectible pieces of crypto art represented by NFTs on the Ethereum blockchain. At the beginning of their release, CryptoPunks were tied to the ERC-20 standard, which was not suitable for giving full uniqueness to a token. For this reason, the team ended up modifying the ERC-20 code just enough to produce non-fungible items, acting as an inspiration for the ERC-721 development shortly after. Hence, it can be said that CryptoPunks technically predate Ethereum’s ERC-721 NFT standard token.

• NFTs online gaming: As the gaming industry progresses, ERC-1155 tokens are becoming a tool with enormous potential, as they have been demonstrated to have a higher degree of interoperability than their predecessors. A video game that contains a huge number of collectible and tradable items within its platform cannot rely on anything else than the ERC-1155 standard to run smoothly. Since multiple items can be stored in a single smart contract, both fungible and non-fungible, any number of items can be sent in a single transaction to one or more recipients. Therefore, ERC-1155 tokens represent a significant step forward in terms of scalability.

Conclusion

The entire Ethereum ecosystem has once again demonstrated that it is capable of developing ever more efficient solutions for the creation of an entirely new user-governed economy on the internet. Since the first appearance of the ERC standards, we have seen how developers and users have come to the creation of even more advanced and specific standards that are suitable for every branch of the crypto industry.
The new ERC-4907 standard has the potential to become the ‘final’ solution to solve liquidity problems related to NFTs, and could hence, open many doors to future implementations in the metaverse sector. As there have been no signs of a slowdown, we will most likely see new developments in the months to follow.

Author: Mauro F.
Translator:Yuanyuan
Reviewer(s) : Ashley
Disclaimer:

• This article represents only the views of the observers and does not constitute any investment suggestions.
  *Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.