ERC Tokens
ERC stands for Ethereum Request for Comments. ERC is a token standard created by Ethereum organizations. It is used for creating smart contracts on the network of the Ethereum blockchain. ERC is a specification of the Ethereum application specification, such as token standard, name registration, library/package format, etc.
Anyone can create an ERC token in Ethereum blockchain app development, but the creator or developer must explicitly clarify the standard and get community approval.
The general ERC standard specifies a collection of features required for the token form so that applications and smart contracts can communicate with the token form as expected.
Ex- ERC-20 Token. The ERC-20 is the most popular and most widely used ERC standard. It is a standard format that simplifies the development, use, and exchange of Ethereum-based tokens. There are many ERC tokens that we will see in this article.
Different Types of ERC Tokens Standard
Below are the different types of ERC tokens standard :
ERC-20: Most Important and Popular Token Standard
The ERC-20 is the most important and most popular token standard. It is generally used by various ICOs that issue tokens on the Ethereum platform. It is a token standard that is fungible. It means that the two coins of the token built on it will have the same value at any given time.
ERC-20 tokens behave similarly to ETH. It means that one token is always equal to all other tokens. With the help of the ERC-20 token standard, users and developers can create tokenized applications called DApps. These DApps can communicate and interoperate with other products and services.
Ex- LockChain. It is a decentralized marketplace with 0% commission. LOC tokens follow the ERC-20 token standard. This implies that a LOC token will always have exactly the same value as another LOC token. It is fungible in the same way ETH is fungible.
ERC-165 to ERC-721: Flagship/Support Pillar
ERC-165 is actually a method standard, not a token. It however is useful for another token standard, ERC-721. Without the help of the ERC-165 token standard, ERC-721 cannot be created and built.
Smart contracts always interact and communicate with crypto tokens. All contracts can communicate and interact with the ERC-20 token, but unlike the ERC- standard for other tokens, such as the ERC-721. Ethereum smart contracts need to implement a specific interface to communicate and interact with tokens that follow other standards.
Examples of functionality offered by ERC-20:
- To transfer tokens from one account to another account.
- To get the current token balance of an account.
- To get the full range of tokens available on the blockchain network.
- To approve whether a token amount can be issued from an account by a third-party account.
When a smart contract implements the following methods and events, it can be referred to as an ERC-20 token contract and, when deployed, is responsible for tracking tokens created on Ethereum.
ERC-721 Standard for Non-fungible Tokens
ERC-721 is a non-fungible token standard. ERC-721 introduces a standard for NFT. This means that this type of token is unique and may have a different value than another token in the same smart contract. There are also some other use cases for non-fungible tokens.
If a smart contract implements the token standard, it can be called an ERC-721 Non-Fungible Token Contract and, when deployed, is responsible for tracking tokens created on Ethereum. Smart contracts that interact with the ERC-721 tokens must comply with the ERC-165 standard because they must implement a different interface.
Some of the NFTs that implement the ERC-721 token standard are CryptoKitties, BAYC, etc.
ERC-223: Solved ERC-20 “Token Loss” Problem
ERC-223 is an Ethereum token standard based on smart contracts that allow users to securely transfer tokens to digital wallets.
ERC-223 retains all of the original functionality and values. This new standard introduces improvements and features that address some of the most serious ERC-20 issues, especially when interacting with other smart contracts.
ERC-223 transfer functions include parameters that ensure the destination address is a smart contract. In that case, the transaction can call the smart contract’s token fallback function and use that function to return it to the sender’s account. The token is then transferred to the smart contract.
If you send an ERC-20 token to a smart contract that cannot handle the token, this action will burn the token and make it unrecoverable. ERC- 223 proposes to prevent these issues.
Developers can accept or reject tokens arriving at smart contract addresses. It specifies a function that the contract can encode so that the send fails if the token cannot be accepted. Tokens will not be burned!
ERC-621: Can Change the Entire Token Pool
This ERC-621 token standard is an extension of ERC- 20. It is designed to increase or decrease total token supply using two features. These features are basically functions: “increase supply” and “decrease supply”.
According to ETH token standard, only smart contract owners or trusted users are recommended to use this token standard.
ERC-777: Reduces Friction in Cryptographic Transactions
When calling smart contracts, the ERC- 20 standard requires another transaction after the first transaction to ensure that the criteria and conditions are met. Only then will the smart contract be called, leading to an increase in the number of transactions.
ERC- 777 is a token standard that includes the ability to identify the receipt of a token and initiate a smart contract immediately after the first transaction. While reducing transaction overhead, users can also reject incoming tokens from blacklisted addresses.
Addresses can be blacklisted for a variety of reasons, including hacking or illegal activity. Being able to refuse payments from such addresses improves the security of Ethereum DApp.
ERC-827: Allows Token Transfers Issued by Third Parties
This is also an extension of ERC-20. It is intended to solve the issues that the ERC- 223 tokens are trying to solve in an improved and better way.
Once this standard is applied, token holders can send tokens while allowing third parties to issue tokens. This ERC standard allows exchanges and wallets to reuse tokens. This is because both parties agree on certain criteria for third parties to issue dynamic quantities.
ERC-884: Tokenized Shares
The ERC-884 token standard has allowed businesses to use blockchain to maintain their stock register. Under the proposed ERC standard, the ERC-884 will benefit it. Each token is designated as an equity interest in a company established in Delaware, USA. The functionalities of ERC-884 also include:
- Verification and identification of token holder and mandatory whitelist
- List of all the shareholders under regulatory requirements
- Record the duties of all the information regulators
- Record the shares transferred under the regulatory requirements
- Shareholders who have lost private keys or tokens will need to return them to their new address
ERC-865: Helping Beginners in the Cryptocurrency World
As a crypto newbie, when you try to transfer Ethereum-based tokens, you suddenly realize that you have to pay a minor fee on Ethereum. It increases difficulties for you.
The ERC-865 proposes to make it easily accessible for new crypto users. It also suggests using tokens to pay miner fees
ERC-1155: Most Advanced Non-Fungible Tokens
ERC- 1155 solves all major problems that are related to ERC-20 and ERC-721. This is the old best token standard for irreplaceable tokens.
With the ERC- 1155, users can create multiple tokens with one smart contract. You can also use ERC-1155 for fungible and non-fungible use cases. All of these features make the ERC-1155 better memory management, more efficient, and budget-friendly.
ERC-1337: Token Standard for Subscription on the Ethereum Blockchain
This standard focuses on interoperability, which allows wallets to enter into recurring payment contracts, and provides an appropriate user interface for managing and canceling subscriptions.
ERC-1400 & ERC-1404: Security Token Specifications
The ERC-1400 specifications were explicitly created for security tokens. A security token is actual security that can represent an actual asset on the blockchain. By default, restricted transfers, the addition of transfer material, management of document libraries, and forced transfers are all possible.
This can be achieved by integrating multiple ERC specifications, each corresponding to a distinct element of the required security token functionality. As a result, there are various features that allow the legal use of security tokens.
The ERC-1404 standard is an extension of the ERC-20 standard and allows security tokens to be issued with transmission limits to meet regulatory requirements.
For example, it allows you to create a whitelist. As a result, issuers can choose who can buy and own tokens. Token holders (investors) must complete an onboarding process that includes KYC and AML searches. You can also use a human-readable message when undoing the token transfer.
ERC-725: A Digital ID Standard
You can use ERC-725 to manage multiple keys and various smart contracts. Different Machines, objects, groups, and different individuals can all be defined using identity ID smart contracts.
Decentralized governance and reputation are made possible by portable and open identity standards. Each person needs to assume their identity and be able to use it in multiple apps and platforms.
Conclusion
As the new Ethereum ERC token standard evolves, each introduces new features and bug fixes to existing tokens. In order for the blockchain platform to offer maximum benefits to end users, it is necessary to first decide which digital token to use.