ERC Tokens: Everything to Know

Overview

ERC (Ethereum Request for Comments) is a standard that defines rules for creating cryptocurrency tokens on Ethereum. The Ethereum blockchain, conceived by Vitalik Buterin in 2013, introduced a revolutionary concept by enabling the execution of programmable smart contracts. Ethereum's native cryptocurrency, ether (ETH), serves as the fuel for executing these smart contracts. However, the Ethereum platform also allows the creation of custom tokens that operate on top of the Ethereum blockchain. These tokens are commonly referred to as ERC tokens.

A Brief History

The concept of ERC tokens emerged in 2015 when Ethereum's creator Vitalik Buterin introduced the ERC-20 standard. ERC-20 tokens quickly gained popularity due to compatibility with Ethereum wallets and exchanges, making them easily tradable and transferable. This standardization provided a framework for developers to create tokens without having to build an entire blockchain from scratch.

As the Ethereum ecosystem expanded, so did the need for more specialized token standards. This led to the development of various ERC standards such as ERC-721, ERC-1155 and ERC-777, each catering to specific use cases and requirements. ERC-721, for instance, introduced the concept of non-fungible tokens (NFTs), which revolutionized the world of digital collectibles and unique digital assets.

ERC: Everything to Know

ERC tokens are created and managed on the Ethereum blockchain, leveraging the platform's underlying smart contract functionality. Smart contracts are self-executing agreements with predefined rules and conditions encoded within them. These contracts automatically execute actions when specific conditions are met, providing a trustless and transparent environment for token transfers and interactions.

ERC-20 tokens, the most widely adopted standard, follow a set of six required functions and three optional functions. The required functions include the total supply of tokens, balance of tokens for a specific address, transferring tokens from one address to another and approving the transfer of tokens on behalf of an address. Optional functions include providing a name, symbol, and the number of decimal places for a token.

ERC-721 tokens, on the other hand, are unique and indivisible tokens. They find extensive use in applications such as gaming, digital art and decentralized finance (DeFi). ERC-721 tokens introduce the concept of ownership and uniqueness, allowing each token to have distinct attributes and properties. This standard enables the creation and trading of rare digital assets, giving rise to the booming NFT market.

Another notable ERC standard is ERC-1155, which combines the features of both ERC-20 and ERC-721. ERC-1155 tokens can represent both fungible and non-fungible assets, allowing for more flexibility in token design. This standard is particularly useful in applications where a combination of different token types is required, such as gaming platforms that incorporate both in-game currencies and unique items.

ERC-777 is a more recent standard that aims to enhance the functionality of ERC-20 tokens. It introduces advanced features such as operators, which allow designated addresses to manage tokens on behalf of others. This standard also enables the implementation of hooks, which are functions triggered before or after specific token transfers. ERC-777 tokens provide greater control and customization options for token developers.

Getting Started

To understand ERC tokens, it is important to have a basic understanding of Ethereum. Ethereum is a decentralized, open-source blockchain platform that allows developers to build and deploy smart contracts and dApps. Smart contracts are self-executing contracts with predefined rules and conditions written into their code. They automatically execute transactions and actions when specific conditions are met. Ethereum's native cryptocurrency is ether (ETH), which is used to pay for transaction fees and incentivize miners to secure the network.

ERC standards are a set of rules and specifications that define how tokens and smart contracts should behave on the Ethereum blockchain. These standards ensure that tokens created on Ethereum can be easily recognized and interacted with by wallets, exchanges and other smart contracts. ERC standards also provide a common language and interface for developers, making it easier to integrate different tokens and dApps.

Unique Aspects

• ERC-20: One of the most well-known and widely used ERC tokens is the ERC-20 standard. ERC-20 defines a set of rules and functions that enable the creation of fungible tokens on the Ethereum blockchain. Fungible tokens are interchangeable and identical to each other, meaning that each token holds the same value as any other token of the same type. This standard has been instrumental in the rise of Initial Coin Offerings (ICOs) and the creation of countless utility tokens.
• ERC-721: In contrast to ERC-20, ERC-721 is a standard for creating non-fungible tokens (NFTs) on Ethereum. NFTs are unique digital assets that represent ownership or proof of authenticity of a specific item, such as artwork, collectibles, or virtual real estate. Each ERC-721 token has a distinct value and cannot be exchanged on a one-to-one basis like ERC-20 tokens. The ERC-721 standard has revolutionized the digital art and collectibles industry by enabling provable ownership and creating new avenues for creators and collectors.
• ERC-1155: This is a hybrid token standard that combines the features of both ERC-20 and ERC-721. It allows for the creation of both fungible and non-fungible tokens within the same smart contract. This flexibility makes ERC-1155 ideal for projects that require a combination of both types of tokens. For example, a game developer could use ERC-1155 to create a game currency (fungible) and unique in-game items (non-fungible) in a single contract, simplifying the development and management process.
• ERC-20 vs. BEP-20 vs. TRC-20: While ERC-20 is the most widely adopted token standard on Ethereum, other blockchain platforms have also developed their own token standards. For example, Binance Smart Chain (BSC) uses the BEP-20 standard, and TRON uses the TRC-20 standard. Although these standards have similarities to ERC-20, they have slight differences in their implementation and compatibility. Developers need to be aware of these differences when deploying tokens on different blockchain platforms.