“ERC? Do you mean ERC-20? Isn’t that the Ethereum Token? I think I know that… “ “But what about ERC-223,721,777,1155?”
Why is ERC so Important?
Before we get to ERC plus a bunch of numbers, let’s talk about why the token standard is so important.
There is a saying in the blockchain world that says, “fat protocol, thin application” and in the traditional Internet world this saying is the opposite “thin protocol, fat application.” This means that in the Internet world, the most profitable and valuable things are concentrated in great applications like Google, Facebook,etc. The underlying protocols, such as ARP, IP, TCP, SNMP and so on, are known only to IT professionals.
However, the blockchain industry is just the opposite — the value is more concentrated in the protocol layer that runs above the application. Just look at BitToken and Ethereum.
ERC-x is the standard of the protocol and the standard of Ethereum, the largest ecosystem in the blockchain industry. Many dApps are created on ETH because the platform is supported by both centralized and decentralized exchanges. Moreover, tokens for new projects can be issued quickly and hit the market, providing projects with capital and publicity in a short time.
Although the ERC-20 was introduced in 2015, it was not widely used until 2017. As any blockchain veteran probably remembers, the pace of exchange trading in the second half of 2017 was tremendous compared with the previous two years. It was during this time that ETH quickly gained popularity due to these factors:
- It was the first version of the Ethereum protocol
- It was the first to introduce smart contracts
- It was relatively simple to use
ERC-20 basically defines only the six simplest functions of tokens:1) total amount, 2) account balance, 3) transmission function, 4) transmission source address, 5) withdrawal approval, 6) account balance check — and several optional functions such as token name, symbol, and digit.
But again, it’s so simple that the main function of the ERC-20 is to issue TOKENS.
But, if you send tokens to the wrong address, then you would receive a message saying, “Sorry! The token you sent has lost.” This bug alone is said to have resulted in a loss of $3–4 million in ERC-20 tokens.
Given the simplicity of the ERC-20 protocol, it’s only natural that someone would want to improve it. That’s when ERC-223 was born! The main features of that token are
- Resolving the bug of losing coins sent to the wrong address
- GAS consumption cut to almost half that for ERC-20
- Backward compatible with ERC-20
However, because ERC-223 is only an expansion of ERC-20, many current wallets do not support it. So although its features are a bit more advanced, the outlook is not as rosy.
The dApp that made ERC-721 famous is widely known throughout the blockchain industry — Cryptokitties! The biggest differentiator between ERC-721 and its predecessors with that it creates non-homogenous tokens, as opposed to homogenous tokens created by ERC-20,223.
What does that mean? Well, for the same ERC-20 project, the tokens you have in your hand and the tokens I have in my hand are no different except for the amount. But with ERC-721, it is possible to tag some unique personal digital assets with real collectible value. ERC-721 is actually based on a discarded Bitcoin technology. When this technology was first invented (long before ether was born), it wanted to put in the Bitcoin world things other than Bitcoin, such as real estate and asset certificates.
Moreover, while ERC-20 tokens are divisible, the smallest unit of an ERC-721 token is 1, which cannot be divided. This way each token is unique. In the future, more and more real assets will be tokenized — from fine art to music royalties to the ownership of tickets to the next day’s game. So it’s exciting to think that all of them could be transparently transferred to the Ethereum blockchain via ERC-721.
Similar to ERC-223, this version is an improvement on the ERC-20. Features include:
- Coin loss bug solved
- Reduced traffic problems and trade settlement on Ethereum blockchain
- Reduce trading friction
- Support to send transaction data and create tokens with customized capacity by using smart contract function
It looks pretty cool, but right now there are no real programs based on the ERC-777.
This protocol was created for gaming. Suppose one day there is a World of Warcraft chain with the equipment, gold coins, food, raw materials — hundreds of thousands of things on-chain which could lead to hundreds of thousands of token contracts. The cost of gas, management, and so on could be unbearable. ERC-1155 is designed to give users a package deal.
For example, if you are shopping on Taobao, instead of buying something with ERC-20 or ERC-721, you can put the items in your ERC-1155 “shopping cart” and the transaction is complete in one checkout. Again, this is a fairly new standard, and its application will be tested over time.
Which standard do we like best? ERC-20 and ERC-721 because the best thing about a standard is that more people choose to use them. In the end, the standard that wins in not necessarily the most advanced technology, but a number of factors such as adoption, user habits, maintenance cost and so on.
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Originally published at Kambria.