INTRODUCTION TO TOKEN STANDARDS FOR ETHEREUM : PART 1
This is the first of a 4 part series on token standards. Here I am going to introduce token standards and the need to have them.
Token standards are the set of rules that allow the development of cryptocurrency tokens on different blockchain protocols. They dictate how a crypto token works by defining a set of rules, conditions, and functions .Ethereum utilizes “Ethereum Improvement Process” (EIP) to evolve and incorporate changes to the Token Standards
What is ERC Token Standard ?
ERC is an acronym that stands for Ethereum Request for Comments. Application-level Standards for Contract Development, Tokens Standards, name registries, library/package formats and more. Common ERC standards define a required set of functions for a token type
Why are Token Standards Required ?
Tokens can represent virtually anything from currency to art to identity
A robust standard is a necessity to handle all the ways in which tokens can be used
Token Standards enables applications and smart contracts to interact with tokens in a predictable way.
It is a way of standardizing best practices for token definition and usage
What are the types of Token ?
There are different types of tokens and standards that correspond to each of them. Some of the standards are applied to all token types.
- Fungible Tokens
- Non Fungible Tokens
- Security Tokens
- Identity Tokens
Which are popular token standards ?
Below are some of the well-known and popular ERC Token Standards widely used in the industry
- ERC20 : Token Standard for fungible tokens
- ERC721 : Token Standard for non-fungible tokens (NFTs)
- ERC1155 : Token Standard for Batching of Tokens
- ERC725 : Token Standard for blockchain-based digital identity.
- ERC1400/1404 : Token Standard for securities tokens.
Ethereum Improvements Proposal (EIP) : Process for ERC Standards Proposal
The process for proposing a standard is defined by Ethereum Creators. An ERC is not something that is decided by a group of experts sitting in a meeting room, but is created by consensus of the blockchain developers and users, which in the true spirit of the blockchain technology.
A [Ethereum Proposal] goes through the following stages(refer infographics below ) to become an ERC.
In brief, an EIP goes through following process before being accepted as an ERC —
- Propose : Developers Submit new ERC Policies through EIP
- Review : Ethereum Community reviews policies submitted
- Revise : Community can request for revisions or suggest amendments and approve/reject these
- Accept : Acceptance for developers to implement
ERC Types
There are over 500 ERC described on Ethereum in various stages. Broadly they are classified into different categories as below —
- ERC (257 EIPs) :Application-level standards and conventions, including contract standards such as token standards (EIP-20), name registries (EIP-137), URI schemes (EIP-681), library/package formats (EIP-190), and account abstraction (EIP-4337).
- Core (190 EIPs) : Improvements requiring a consensus fork like EIP-5, EIP-211
- Meta (18 EIPs) : Describes a process surrounding Ethereum or proposes a change to (or an event in) a process. Process EIPs are like Standards Track EIPs but apply to areas other than the Ethereum protocol itself.
- Interface (43 EIPs) : Improvements around client API/RPC specifications and standards, and also certain language-level standards like method names (EIP-6) and contract ABIs.
- Informational(6 EIPs) : Describes a Ethereum design issue, or provides general guidelines or information to the Ethereum community, but does not propose a new feature.
- Networking (13 EIPs) : Includes improvements around devp2p (EIP-8) and Light Ethereum Subprotocol, as well as proposed improvements to network protocol specifications of whisper and swarm.
In the next part, we will see some of these token standards specifications in detail.
Share your thoughts in the comments below. Thank you for reading ! : )
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