Understanding the Ethereum Standard
Ethereum, the largest and most populated Layer 1 blockchain network in the world, has revolutionized token creation and functionality through its ERC standards.
ERC20, the dominant standard on Ethereum, paved the way for the streamlined development of tokens by providing a set of basic guidelines and rules.
This article seeks to provide a simple introduction to what Ethereum standard is and the different standards.
What is ERC?
ERC stands for Ethereum Request for Comment, and it serves as a platform for introducing technical information to developers and users.
The first of the Ethereum Standard is the ERC20. Approved in 2017, the ERC20 token standard quickly gained popularity and became the foundation for tens of thousands of tokens created on the Ethereum network. During the Initial Coin Offering (ICO) explosion of 2017, ERC20 tokens dominated the market.
To be ERC20 compliant, a token must possess certain attributes hardcoded into its code. These attributes include:
TotalSupply — provides information about the total token supply
BalanceOf — indicates the account balance of the token owner
Transfer — executes transfers of tokens to specified addresses
TransferFrom — allows transfers from a specified address
Approve — allows spenders to withdraw tokens
Allowance — returns tokens from a spender to the owner
Smart contracts that enable these functions are considered ERC20 contracts.
Other blockchains have also adopted similar token standards, with the BEP20 token standard for the Binance Smart Chain, TRC20 for the Tron network, and most recently BRC20 for the Bitcoin network being notable examples.
A Look at Other ERC Token Standards
As blockchain technology evolves, so do token standards. Each standard serves a specific function within its relevant network. Let’s explore some of the most important ERC token standards and their functions:
1. ERC223 — European Research Council Standard:
This standard was created to address the issue of lost tokens during transactions. Unlike ERC20, which doesn’t have a mechanism to recover lost tokens, ERC223 includes a functionality called “tokenFallback” that returns tokens sent to incompatible smart contracts back to the sender. It also improves transaction efficiency by requiring only one step instead of two. Although ERC223 offers useful functionality, it has not gained widespread adoption compared to newer standards like ERC777.
2. ERC777 — Ethereum Based Currency:
Building upon ERC223, the ERC777 standard introduces a new class of addresses called “operators,” which can send or receive funds. It also incorporates transaction hooks to inform smart contracts of upcoming transactions. This feature prevents incompatible transactions from being executed, reducing the risk of token loss.
However, ERC777 has not been widely adopted as ERC20 remains the preferred choice for developers.
3. ERC621: ERC621 allows projects to manage token supply through two new functions: “increaseSupply” and “decreaseSupply.” This standard enables the adjustment of the total token supply, offering significant applications. However, it is still in early development stages.
4. ERC721 — Non-Fungible Token Standard: The ERC721 standard is widely known in the context of non-fungible tokens (NFTs). It introduces a separate standard for NFTs, allowing them to have unique values within a smart contract. ERC721 tokens are perfect for platforms that offer collectible items, such as trading cards, digital artworks, and unique digital assets stored on the blockchain.
5. ERC1155 — Multi-Token Standard: ERC1155 introduces a new smart contract type that manages both fungible and non-fungible tokens. It improves the efficiency of decentralized applications by enabling the sending of different token types in a single transaction. This reduces costs and enhances transaction speeds. ERC1155 is already live on the Ethereum Network and is gaining adoption due to the increased use of NFTs in various industries.
6. ERC165: ERC165 is a standard that allows smart contracts to detect and publish the interfaces they implement. It provides a consistent way to identify whether a contract supports a specific interface by using the “supportsInterface” function. Contracts can publish their supported interfaces by including the corresponding interface identifiers. ERC165 promotes interoperability and compatibility among contracts in the Ethereum ecosystem.
7. ERC827: ERC-827 is an enhanced version of the ERC20 token standard on the Ethereum network. While ERC20 tokens only facilitate the exchange of values, ERC827 expands this capability by enabling users to transmit both currency and data simultaneously. This means that Ethereum users can include additional information or data along with the transfer of tokens, providing more flexibility and functionality in token transactions.
8. ERC725: ERC-725 is an innovative proposal by Fabian Vogelstelle, the creator of ERC-20 and Web3.js, which introduces a unique standard for publishing and managing identities on the Ethereum Virtual Machine (EVM)-based blockchain. This standard focuses on proxy smart contracts that can be controlled by multiple keys, including other smart contracts. It provides a framework for secure and decentralized identity management, allowing for more robust and flexible control over identity-related operations on the blockchain.
9. ERC884 — Stock Tokenization: ERC-884 is a specific token standard designed to facilitate the creation of tradable ERC-20 tokens. These tokens are specifically intended to represent equity issued by public or private Delaware corporations. This standard is particularly significant because it enables organizations based in Delaware, USA, to leverage blockchain technology for managing share registrations in compliance with the state’s regulations. With ERC-884, these corporations can explore the benefits of utilizing blockchain in their equity-related processes while ensuring regulatory compliance within the Delaware jurisdiction.
10. ERC865: The ERC-865 token standard is primarily focused on enhancing the usability of the Ethereum network by eliminating the need for users to pay transaction fees in gas. Instead, ERC-865 allows token owners to pay transaction fees directly using the tokens themselves, all within a single transaction. By enabling this functionality, ERC-865 aims to increase the convenience and efficiency of token transactions on the Ethereum network, making it more user-friendly and accessible. This standard contributes to improving the overall usability and adoption of Ethereum-based tokens.
11. ERC1400: ERC-1400 is a proposed standard for issuing and managing security tokens on the Ethereum blockchain. These tokens represent assets subject to securities regulation, providing transparency and compliance within the blockchain ecosystem.
The ERC-1400 standard aims to enhance the transparency, security, and efficiency of security token offerings (STOs) on the Ethereum blockchain. It provides a foundation for creating and managing security tokens in a regulatory-compliant manner, opening up new possibilities for digital asset ownership and investment opportunities within the bounds of securities regulations.
What the Future Holds for Ethereum Token Standards
The future of ERC token standards is shaped by the Ethereum community, which proposes and approves these standards to enhance the user experience across the network. While congestion and high fees continue to be challenges, the Merge and Sharding upgrades are expected to address these issues.
Future ERC standards such as ERC1400 will contribute to the security, scalability, and utility of the Ethereum blockchain, fostering mass adoption across various industries, including subscriptions, intellectual property, tokenized real estate, gaming, NFTs, and DeFi.
Takeaway
ERC token standards have revolutionized token creation and functionality on the Ethereum network. These standards provide guidelines for developers, ensuring compatibility and interoperability. As blockchain technology continues to advance, new ERC standards will emerge, enhancing the capabilities of Ethereum and driving innovation across various sectors.
