What are the most important ERC token standards and how are they evolving?

E is for Ethereum

Ethereum is the largest and most populated Layer 1 (L1) blockchain network in the world, hosting thousands of decentralized applications (dApps), non-fungible token (NFT) projects and decentralized finance (DeFi) projects. Throughout this vast ecosystem, there are hundreds if not thousands of tokens and most of them are based on the same standard — ERC20.

Thanks to the innovation brought by ERC20, all-new tokens created on the network are streamlined, following a set of basic guidelines and rules.

What does ERC stand for?

ERC stands for Ethereum request for comment and it serves to introduce technical information to a group of developers or regular users. Proposed back in 2015, and approved in 2017, ERC20 quickly turned into the dominant standard on the Ethereum blockchain.

Fast forward to 2022 and tens of thousands of tokens have already been created using the ERC20 token standard. The 2017 Initial Coin Offering (ICO) explosion was dominated by tokens using this standard.

In short, ERC20 is the reason that Ethereum has turned into the easy-to-use preferred blockchain platform relied upon by thousands of developers around the world.

To be ERC20 compliant a token must have the following attributes hard-baked into the code:

• TotalSupply: provides information about the total token supply
• BalanceOf: provides account balance of the owner’s account
• Transfer: executes transfers of a specified number of tokens to a specified address
• TransferFrom: executes transfers of a specified number of tokens from a specified address
• Approve: allows a spender to withdraw a set number of tokens from a specified account
• Allowance: returns a set number of tokens from a spender to the owner

If a smart contract enables all of the functions listed above, it can rightly be called an ERC20 contract. Since the launch of the ERC20 token standard, many other blockchains have followed suit. Perhaps the best example of an early copycat rival was the BEP20, the token standard for the Binance Smart Chain (BSC) network.

The most important ERC standards

As blockchain continues to evolve, so do token standards, each one prescribed a specific function within its relevant network. Below is a list of the most important token standards and what they do.

ERC223

This standard was created to prevent the sudden loss of tokens during a transaction. If you send ERC20 tokens to an address that doesn’t support them they won’t be returned to you, and it’s game over for those assets. This is one of the downsides of ERC20 as this doesn’t have an in-built mechanism to recover lost tokens.

This is where ERC223 comes in. By adding a new functionality called “tokenFallback”, tokens that are sent to incompatible smart contracts are, instead, returned to the sender. ERC223 also improves efficiency, as transactions require not two steps, but one. Despite its neat functionality, this standard didn’t receive the attention it deserved and was never implemented, with many developers preferring to use the newer ERC777.

ERC777

The ERC777 standard went a step beyond what ERC223 could deliver by adding an entirely new class of addresses called ‘operators’, which can be used to send or receive funds.

In addition, ERC777 enhanced its tokens with the ability to send ‘hooks’. These hooks inform smart contracts of upcoming transactions. If a certain transaction is incompatible with the smart contract, then it will be rejected, preventing the loss of tokens. Even though the ERC777 solves a clear problem, the adoption of the ERC20 token standard is so engrained it is rarely used in its place.

ERC621

ERC621 is a particular standard that allows projects to manage the token supply with two new functions. These are ‘increaseSupply’, and ‘decreaseSupply’. Using these two new functions, ERC621 makes it possible to increase or decrease the total token supply. Despite the huge applications of this standard, it’s still in early development.

ERC721

If you’re into NFTs, you’ve likely heard of the ERC721. This is the most widely used token for NFTs. It introduces a separate standard for NFTs and defines them as tokens that can have different values than other similar tokens from the same smart contract. ERC721 is perfect for platforms that offer collectible items such as access keys, tickets, seats, unique pieces of art, music, and anything that can be digitally tagged and stored on the blockchain.

ERC1155

ERC1155 adds a new smart contract type that allows for the easy management of fungible and non-fungible (NFT) tokens. It improves the overall efficiency of dApps by making it possible to send different types of tokens with a single transaction. This also reduces transaction costs while increasing transaction speeds. The ERC1155 is finalized and live on the Ethereum Network and, due to the rise in the use of NFTs in different areas of marketing and entertainment, enjoying increased adoption.

What the future holds for ERC token standards

Token standards on Ethereum are proposed and approved by the community. The primary goal is to improve the user experience across the Ethereum network. After the successful Merge, many users are already turning to the next milestone on the Ethereum roadmap — the Sharding upgrade.

In the meantime, ERC standards are here to stay making building on Ethereum’s ecosystem easier while enhancing existing features and adding new ones that will facilitate mass adoption.

With future ERCs, developers will be able to make the Ethereum blockchain even more secure, help further increase its use cases, and spread utility to subscriptions, intellectual property, tokenized real estate, new gaming, NFT, and DeFi innovations, and more.

While Ethereum’s ERC standards and the Merge, are welcome innovations, they haven’t solved the problems of congestion and high fees. Myria is an all-in-one Layer 2 gaming solution built on Ethereum that offers users speed, scale, zero gas fees and free NFT minting. So, if you want to build on Web3, make it Myria.