Ethereum Token Standards
blog APRIL 17, 2023
Ethereum, as the first and largest L1, has been leading crypto innovation in multiple ways since its launch. One way it achieves this is by facilitating community involvement via ERCs (Ethereum Request for Comments) and EIPs (Ethereum Improvement Proposals); anyone can propose an ERC or an EIP by creating a proposal document that outlines the technical details and specifications of the proposed standard or protocol improvement. Once a proposal is submitted, it undergoes review: ERC proposals are reviewed by the Ethereum Token Standards Working Group, while EIP proposals are reviewed by the EIP Editors.
The review process includes community feedback and discussion to ensure that the proposal is technically sound and aligned with the goals of the Ethereum network. If accepted, the proposal is assigned a number and becomes an official ERC or EIP. ERCs and EIPs are open standards and are publicly available for anyone to use and build upon. It’s important to note that ERCs can become “stagnant” if they haven’t seen any development for a few months, meaning they could become out of date with new Ethereum standards.
Being stagnant doesn’t prevent anyone from using it to build their own token smart contract, but you need to be aware that the contract may not function properly. It’s also important to be wary of ERCs that were not officially submitted for review as they could have deeper issues than just being out of date. In this blog, we will discuss some of the different interesting token standards in the Ethereum ecosystem and provide examples of projects that are using them or theoretical use cases.
ERC-20 is the most common and basic token standard used in the Ethereum ecosystem. It defines the rules for creating fungible tokens, which means that each token within a particular smart contract is interchangeable with another. ERC-20 tokens, as of April 2023, made up 58% of total crypto market capitalization. Examples: USDT, BNB, LINK, UNI, AAVE, DAI, MATIC, and many more
ERC-777 is an improved version of the ERC-20 standard that includes new features such as allowing operators to send tokens on behalf of another address (contract or regular account), send/receive hooks to offer token holders more control over their tokens, and providing increased protection against lost tokens. Example: MyCryptoHeroes is a popular blockchain game that uses ERC-777 tokens to represent game assets, such as heroes and weapons.
- ERC-1337 (stagnant)
ERC-1337 is a token standard that powers subscription-based payments. It enables the creation of tokens that represent subscriptions to a particular service or product. Example: Unlock is a blockchain-based protocol that uses ERC-1337 tokens to represent subscriptions to exclusive content, events, and services.
ERC-721 is a token standard that enables the creation of non-fungible tokens (NFTs). NFTs are unique and indivisible tokens that represent a specific asset or collectible and are used in art, gaming, music, social identity, domains, and much more. Example: CryptoKitties is an NFT game where each CryptoKitty is an ERC-721 token that represents a unique digital cat.
ERC-4907 has a dual-role function that separates the owner’s role from the user’s role, allowing NFTs to be rented. Example: Double Protocol on Shardeum created a marketplace for these.
ERC-1410: differentiated ownership / transparent restrictions
ERC-1594: on-chain restriction checking with error signaling, off-chain data injection for transfer restrictions, and issuance/redemption semantics
ERC-1643: document/legend management
ERC-1644: controller operations (force transfer)
ERC-5643 is a token standard that allows the creation of subscription-based payments coupled with an asset. It proposes an interface for NFTs to be used as recurring, expirable subscriptions. Example: membership NFTs where you need to pay to be a member.
ERC-1948 is for NFTs that have dynamic data associated that can change over time. Example: intellectual property tokens that encode rights holders
ERC-864 is for divisible NFTs – i.e. an NFT that can be divided into smaller parts and shared between multiple users. Example: fine art pieces that are to be owned by a community instead of one person.
Combination of Fungible and Non-Fungible
ERC-1155 is a token standard that allows the creation of both fungible and non-fungible tokens within one smart contract, meaning that developers can create a variety of assets without having to deploy multiple contracts. Example: Enjin is a blockchain gaming platform that uses ERC-1155 tokens to represent in-game assets, such as weapons and armor. ERC-725 (submitted) ERC-725 is a token standard for self-sovereign identity on the Ethereum network. It is designed to allow users to own and manage their digital identities rather than giving ownership to organizations where users can take their identity across different apps and platforms, giving them more control over their personal information. Example: a social media platform that allows users to verify their identity using ERC-725 tokens, helping prevent fake accounts, and improving the overall security of the platform.
ERC-1400 is different in the sense that it started out as a standard for security tokens and ended up becoming an umbrella of ERC-1410, ERC-1594, ERC-1643, and ERC-1644: These are the standard for security tokens that are designed to include features such as investor restrictions, compliance, and auditing capabilities, providing a flexible framework for tokens that can be traded on public and private exchanges. Example: tZERO is a blockchain-based platform that uses ERC-1400 tokens to represent ownership in real estate and other assets.
ERC-1404 is a more restrictive version of ERC-1400 that limits transfers to only authorized parties. This can be useful for securities that require strict compliance with regulations.
ERC-884 is a token standard specifically applied in Delaware, USA, for tradable equity tokens. It allows for the creation of tokens that represent an equity share issued by any corporation, whether private or public. Security tokens have the potential to revolutionize the way that financial assets are traded and managed because, by using the Ethereum network, security tokens can be traded 24/7 without the need for intermediaries like brokers or custodians.
There are a plethora of different token standards that expand on the fundamental ERC-20 and ERC-721 standards to make them better suited to a particular use-case; some are live, some are submitted and are in review, Some are stagnant, and some are just ideas. This one-pager was created to shine a light on the innovation happening on Ethereum and help identify more appropriate token standards