Résumé
Token standards are sets of rules and conventions that govern how a crypto token works. The most popular standards are: ERC-20, BEP-20, ERC-721, and ERC-1155.
Introduction
While there are tens of thousands of cryptocurrencies, you may be surprised to learn that most of them are built on the same blueprints. These blueprints, called token standards, define some of the key features and properties of blockchain tokens.
Why use token standards?
Interoperability
Token standards ensure that all products built using that standard can interoperate or work together. If a project issues a token built to a specific standard, it will be compatible with existing platforms and applications like wallets. For example, ERC-20 assets are interoperable with other products and services built using that same standard.
This is also why you can trade your ERC-20 token against another. Without token standards, it would be much harder to trade between multiple cryptocurrencies. You would be forced to create specific wallets for particular tokens instead of using one wallet that can hold many cryptocurrencies.
Composability
In programming, having a composable system allows developers to reuse existing components to create new products. This also applies to tokenization: using token standards allows developers to spend less time on core functionality, leaving more time for experimentation and innovation.
Efficiency
Token standards also facilitate the interaction between smart contracts. Since smart contracts follow token standards and are used for their deployment, they can be used to track the tokens created.
Token standards, such as ERC-20 and BEP-20 , come with essential features, including address lookup and token balance, which allow smart contracts to track tokens more efficiently. For example, to inspect an ERC-20 token, a developer can use an interface called the contract’s Application Binary Interface (ABI) to track token transfers and other data.
The most common standards for crypto tokens and DeFi
The BEP-20 standard
The BEP-20 standard is a token standard on the BNB Smart Chain (BSC). Developed as a technical specification for the BSC, it allows developers to create a variety of tokens, including peggy coins, utility tokens, stablecoins, and more. The BEP-20 standard also introduces features such as blacklisting, issuance, and pausing token burns.
Below are the main features of the BEP-20 token standard:
Total Supply: Sets the total token supply of a specific BEP-20 token.
Balance of: Sets the balance of the token.
Transfer: Allows users to transfer ownership of a token to someone else.
Transfer From: Allows a token to be transferred to someone else on behalf of a user via a smart contract.
Approval: Sets a limit on the number of tokens a smart contract can withdraw.
Permission: Defines which external addresses have permission to spend tokens.
ERC-20
In 2015, Fabian Vogelsteller proposed ERC-20, a token standard that later became the primary framework for developers to design their own tokens, including virtual tokens, staking tokens, and virtual currencies.
The ERC-20 standard is a token standard for developing assets that follow common rules and are interchangeable with each other (i.e. fungible). So, if you create 1,000 units of an ERC-20 token, each unit will have the same functionality.
The BEP-20 standard is very similar to the ERC-20 standard. Note, however, that they belong to separate blockchain networks. The ERC-20 token standard is used on the Ethereum blockchain, while the BEP-20 standard is specific to the BNB Smart Chain (BSC).
The ERC-721 standard
Did you know that a large portion of non-fungible tokens (NFTs) on Ethereum are all based on the same standard, the ERC-721 standard? Whether it’s a limited edition NFT or a Proof of Presence Protocol (POAP), your NFT was likely created using the same template. So what makes NFTs unique? According to one of the guidelines, to be an ERC-721 token, the asset must have a tokenId that is globally unique.
Features of the ERC-721 standard include token transfer, current balance, total supply, and as mentioned above, being globally unique.
The ERC-1155 standard
As token standards evolve, a directive to encompass the industry’s need for multiple token types emerges. The ERC-1155 standard is a multi-token standard that allows for the creation of different types of digital assets, including utility tokens like BNB and NFTs.
Among other features, the ERC-1155 standard offers token batching capabilities, including:
Batch Transfer: Multiple assets can be transferred simultaneously.
Batch Balance: Balances of multiple assets can be retrieved at once.
Batch Approval: All tokens can be approved for an address.
NFT Support: A token is considered an NFT if the supply is only 1.
Limitations of token standards
While tokens created using the same standards have the same basic functionality and can interact well with each other, tokens from different standards are unlikely to do so. Given that different rules govern different industry standards, it’s no surprise that they aren’t always compatible with each other. This can mean that tokens developed using different standards may not exist on the same platform, or that they are unable to communicate or be traded with each other. If you own multiple cryptocurrencies, you may have experienced the frustration of not being able to use your BTC on Ethereum. To address this limitation, the industry has created a new type of token called wrapped tokens.
Wrapped Tokens
A wrapped token is a cryptocurrency whose value is tied to that of another asset. Typically, the original asset is placed in a digital vault called a “wrapper,” and a wrapped version of it is created on another blockchain, like a duplicate.
Conclusion
Token standards are like blueprints for designing and launching tokens based on a blockchain. There are several token standards in the industry today, and innovative solutions such as blockchain gateways and wrapping mechanisms can help to circumvent incompatibility issues between these tokens.
More information
An Introduction to ERC-20 Tokens
Three Popular Crypto Gateways and How They Work
How to use Polygon Bridge?
What are atomic swaps?