In the world of blockchain, particularly within Ethereum, tokens are essential elements that represent assets, utilities, or even rights within a decentralized network. These tokens are typically built on top of smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. However, there are certain standards that help maintain uniformity across token creation and ensure their interoperability with the broader ecosystem. The most commonly used token standards are ERC-20, ERC-721, and ERC-1155. Each of these standards caters to different use cases, depending on the type of token and its specific attributes.
1. ERC-20 Token Standard
1.1. What is ERC-20?
The ERC-20 standard is the most widely used token standard in the Ethereum ecosystem. It defines a set of rules and functions that all Ethereum-based tokens must follow to be compatible with existing wallets, exchanges, and smart contracts. The ERC-20 standard allows for the creation of fungible tokens, meaning each token of the same type is identical in value and can be exchanged on a one-to-one basis. This is similar to traditional currencies, where each unit has the same value.
1.2. Key Features of ERC-20 Tokens
The ERC-20 standard is defined by six mandatory functions and two optional functions. These are:
totalSupply(): Returns the total supply of tokens in circulation.balanceOf(address account): Returns the token balance of a specific address.transfer(address recipient, uint256 amount): Transfers a specified amount of tokens to a given address.transferFrom(address sender, address recipient, uint256 amount): Allows a contract to transfer tokens on behalf of the owner (typically used in decentralized exchanges).approve(address spender, uint256 amount): Allows the owner to approve another address to spend a certain amount of tokens on their behalf.allowance(address owner, address spender): Returns the amount of tokens that a spender is allowed to transfer from the owner’s account.
Optional functions include events like Transfer and Approval, which help track changes in balances and approvals.
1.3. Use Cases for ERC-20 Tokens
ERC-20 tokens are primarily used for fungible assets and can represent various things, such as:
- Cryptocurrencies: Many popular tokens like USDT (Tether), LINK (Chainlink), and DAI (MakerDAO) follow the ERC-20 standard.
- Utility Tokens: Tokens used within decentralized applications (dApps) as a means of paying for services, like BAT (Basic Attention Token), which is used for advertising on the Brave browser.
- Governance Tokens: Tokens used to participate in the governance of a blockchain project, such as UNI (Uniswap).
2. ERC-721 Token Standard
2.1. What is ERC-721?
The ERC-721 standard is used to create non-fungible tokens (NFTs). Unlike ERC-20 tokens, which are fungible and identical in value, ERC-721 tokens are unique and can represent ownership of a specific asset or item. Each token is distinct and carries its own metadata and attributes. This makes ERC-721 ideal for use cases where uniqueness and provenance are important, such as digital art, collectibles, or real estate.
2.2. Key Features of ERC-721 Tokens
An ERC-721 token defines a set of functions that allow for the creation and transfer of non-fungible assets. The key functions include:
balanceOf(address owner): Returns the number of NFTs owned by a given address.ownerOf(uint256 tokenId): Returns the owner of a specific NFT, identified by itstokenId.transferFrom(address from, address to, uint256 tokenId): Transfers the NFT from one address to another.approve(address to, uint256 tokenId): Allows a specific address to transfer the NFT on behalf of the owner.getApproved(uint256 tokenId): Returns the address approved to manage a specific NFT.setApprovalForAll(address operator, bool approved): Approves or revokes approval for an operator to manage all of the owner’s NFTs.
An important aspect of ERC-721 tokens is that each token has a unique tokenId that differentiates it from others, and metadata can be linked to it, often stored off-chain (such as through IPFS).
2.3. Use Cases for ERC-721 Tokens
ERC-721 tokens are predominantly used for non-fungible items. Some common use cases include:
- Digital Collectibles: Popular platforms like CryptoKitties and NBA Top Shot use ERC-721 tokens to create unique, collectible digital items.
- Art and Music: ERC-721 is widely used in the NFT space for tokenizing art, music, and other creative content. Platforms like OpenSea and Rarible enable artists to sell their digital creations as NFTs.
- Gaming: In blockchain-based games like Axie Infinity and Decentraland, NFTs represent in-game assets, such as characters, skins, or virtual land.
- Real Estate: Tokenizing real estate assets as NFTs, where each property is uniquely represented by an ERC-721 token.
3. ERC-1155 Token Standard
3.1. What is ERC-1155?
The ERC-1155 standard is a more advanced token standard that supports both fungible and non-fungible tokens under a single smart contract. It was created to improve on ERC-721 by allowing a single contract to manage multiple types of tokens (both fungible and non-fungible) with a higher degree of efficiency. ERC-1155 is often described as the “multi-token standard” because it allows for the creation and transfer of different token types within a single contract.
3.2. Key Features of ERC-1155 Tokens
Some key functions of the ERC-1155 standard include:
balanceOf(address account, uint256 id): Returns the balance of a specific token type for a given account.balanceOfBatch(address[] accounts, uint256[] ids): Returns the balance of multiple token types for multiple addresses.safeTransferFrom(address from, address to, uint256 id, uint256 amount, bytes data): Transfers a specified amount of a given token from one address to another.safeBatchTransferFrom(address from, address to, uint256[] ids, uint256[] amounts, bytes data): Allows the transfer of multiple token types in a single transaction.
ERC-1155 allows for batch transfers, reducing the gas costs associated with transferring multiple tokens simultaneously, making it more efficient than both ERC-20 and ERC-721 for certain use cases.
3.3. Use Cases for ERC-1155 Tokens
ERC-1155 is useful for situations where multiple types of tokens need to be handled within the same smart contract, such as:
- Gaming: In-game assets can be fungible (e.g., in-game currency) or non-fungible (e.g., unique weapons or characters). Games like Gods Unchained and Enjin use ERC-1155 tokens to represent both types of assets.
- Collectibles: Similar to ERC-721, ERC-1155 can be used for digital collectibles but with more flexibility in handling multiple types of assets.
- NFT Marketplaces: Platforms that support both fungible and non-fungible assets, such as Opensea, can use ERC-1155 to provide users with more flexible options when buying, selling, or trading tokens.
4. Comparison of ERC-20, ERC-721, and ERC-1155
| Feature | ERC-20 | ERC-721 | ERC-1155 |
|---|---|---|---|
| Token Type | Fungible | Non-fungible | Both fungible and non-fungible |
| Unique ID | No | Yes (token ID) | Yes (token ID for each token type) |
| Use Cases | Cryptocurrencies, Utility tokens | Digital Collectibles, Art, Gaming | Gaming, Collectibles, In-game Assets |
| Transactions | Single transfer per transaction | Single transfer per transaction | Batch transfers, multiple token types |
| Gas Efficiency | High (one transaction per transfer) | High (one transaction per transfer) | More efficient, supports batch transfers |