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Token standards are sets of rules and agreements that govern the operation of a cryptocurrency token. Popular standards include ERC-20, BEP-20, ERC-721 and ERC-1155.

Introduction

Although there are tens of thousands of different cryptocurrencies, most of them are built on the same patterns. These schemes are called token standards and define the key functionality and properties of blockchain tokens.

Why do we need token standards?

Compatibility

The token standard ensures that all products created under this standard can interoperate with each other and work together. If a project issues a token based on a token standard, then the new token will be compatible with existing platforms and applications, including wallets. For example, ERC-20 assets are compatible with other products and services developed using this token standard.

Due to this, the ERC-20 token can also be exchanged for another token of this standard. Without token standards, trading multiple cryptocurrencies would be much more difficult. In this case, individual wallets would have to be created for each token instead of using one wallet for many different cryptocurrencies.

Connectivity

In programming, having a connectable system allows developers to reuse existing components to create new products. This also applies to token creation: using token standards speeds up the development of core functionality, leaving more time for experimentation and innovation.

Efficiency

Token standards also simplify interactions between smart contracts. Smart contracts that implement token standards and the tokens themselves can be used to track created tokens.

Token standards such as ERC-20 and BEP-20 contain important features such as address lookup and token balance display, allowing smart contracts to track tokens more efficiently. For example, to check the transfer history and other data of an ERC-20 token, a developer can use the contract's Application Binary Interface (ABI).

BEP-20

BEP-20 is the BNB Smart Chain (BSC) token standard. It was originally created as a technical specification for the BSC. BEP-20 allows developers to launch a variety of tokens, including pegged coins, utility tokens, stablecoins, and others. The BEP-20 standard also introduces features such as blacklisting, mining, and token burning suspension.

The following are the main features of the BEP-20 standard:

  1. TotalSupply: Determines the total supply of a specific BEP-20 token.

  2. BalanceOf: Defines the balance of the token.

  3. Transfer: Allows users to transfer ownership of tokens to others.

  4. TransferFrom: allows you to transfer tokens to others on behalf of the user through a smart contract.

  5. Approve: Defines a limit on the number of tokens that the smart contract can withdraw.

  6. Allowance: Defines external addresses that are allowed to spend tokens.

ERC-20

In 2015, Fabian Vogelsteller proposed the ERC-20 token standard, which subsequently became the main benchmark for token creators, including virtual tokens, staking tokens and virtual currencies.

ERC-20 is a token standard that is used to develop fungible assets that follow common rules. For example, if you create 1000 units of an ERC-20 token, each unit will have the same functionality.

The ERC-20 standard is very similar to the BEP-20 standard. However, they belong to different blockchain networks. ERC-20 is used on the Ethereum blockchain, and BEP-20 is used on the BNB Smart Chain (BSC).

ERC-721

Did you know that a significant portion of non-fungible tokens (NFTs) on Ethereum are based on the same standard, ERC-721? Whether it's a limited collection of NFTs or a Proof of Attendance Protocol (POAP), chances are your NFT was created using this scheme. But what makes NFTs unique? One of the key principles is that each ERC-721 token must have a unique tokenId.

ERC-721 functionality includes token transfer, running balance, total supply, and as mentioned, uniqueness.

ERC-1155

With the development of token standards, one scheme has emerged to address the cryptocurrency industry's need for multiple types of tokens. ERC-1155 is a multi-token standard that allows the creation of various types of digital assets, including utility tokens such as BNB and NFTs.

Among other features, ERC-1155 offers token batch processing, which includes:

  1. Batch Transfer: Transferring multiple assets at once.

  2. Batch Balance: Get balances of multiple assets in one step.

  3. Batch Confirmation: All tokens can be confirmed to be sent to an address.

  4. NFT support: a token is considered an NFT if it exists in a single copy.

Limitations of Token Standards

Tokens created based on the same standard have the same core capabilities and can freely interoperate with each other, while tokens of different standards rarely can. Since the industry has different regulations governing token standards, they are not always compatible with each other. This means that tokens developed using different standards sometimes cannot exist on the same platform, interoperate or be exchanged with each other. Owners of several cryptocurrencies may have encountered the inability to use BTC on the Ethereum platform. To eliminate these inconveniences, the developers created a new type of token called wrapped tokens.

Wrapped tokens

A Wrapped token is a cryptocurrency whose value is tied to the value of another asset. The original asset is placed in a “wrapper,” a kind of digital storage that allows you to create a wrapped version on another blockchain.

In conclusion

Token standards are blueprints for developing and launching blockchain-based tokens. There are now several token standards in the industry, as well as many innovative solutions such as blockchain bridges and wrapping mechanisms that help eliminate token incompatibility.

  • Introduction to ERC-20 Tokens

  • Three popular cryptocurrency bridges and how they work

  • How to use Polygon Bridge

  • How atomic swaps work