Tokens are digital assets built on the blockchain of a cryptocurrency. Unlike coins, which are built on their own native blockchain, tokens are built on an existing blockchain. The ERC20 token standards are a set of rules that allow the development of cryptocurrency tokens on different blockchain protocols.

Each standard has its rules such as being divisible or not, allowing certain specific actions or not, or its mass optimization and scalability.

Types of contract standards (Token Standards)

ERC-20, ERC-721 and ERC-1155 are the three most popular ERC token standards or protocols and are used in major industries. ERC-223, ERC-777 and ERC-4626 are also used to a lesser extent.‍

ERC-20 Token Standards

ERC-20 is the first token standard that was introduced on the Ethereum blockchain to allow the creation of fungible tokens. Each ERC-20 token is interchangeable with other tokens of this type. The main purpose of ERC-20 tokens is to work with smart contracts and define a common list of rules that all tokens on the Ethereum blockchain must follow. ERC20 token development guide the creation of new tokens on the Ethereum blockchain so that they are interchangeable with other tokens used within smart contracts.

ERC-223 Token Standard

ERC-223 was developed to address a number of issues in the ERC-20 standard. The main weakness of ERC-20, which is addressed in ERC-223, is that users lose their tokens when they accidentally send them to a smart contract instead of a proper wallet.

The design of ERC-223 addresses this problem by allowing users to move tokens to smart contracts and wallets that serve the same purpose. ERC-223 tokens are more efficient than ERC-20 tokens as transactions only require one step instead of two.

ERC-721 Token Standard

Unlike ERC-20, which is a fungible token standard, ERC-721 is a standard for representing ownership of non-fungible tokens (NFTs), where each token is unique. ERC-721 can represent different types of digital assets, such as unique pieces of content, social media content, gaming assets and collectibles, musician and venue collaboration, music NFTs, and NFTs in event ticket sales, and to represent ownership of high value assets.

The popular NFT collection Azuki created a modification to the ERC-721 Token Standard that allows transactions of these tokens to be issued en masse at a lower cost. They called this optimization ERC-721A (for the A in Azuki) and it is a format widely used in NFT collections today.

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ERC-777 Token Standard

ERC-777 is built on top of the ERC-20 standard and offers some important improvements. ERC-777 tokens are more flexible than ERC-20 tokens as they allow users to choose a destination address for sending tokens. Additionally, an operator can be configured to approve token transfers on behalf of another address.

ERC-777 also offers a destination check feature, which prevents tokens from being lost when sent to contracts that are not supported.‍

ERC-1155 Token Standard

ERC-1155 is a token standard that allows the creation of fungible and non-fungible tokens on a single blockchain. Fungible tokens on ERC-1155 can be split and rejoined, allowing greater flexibility for token developers.

Additionally, ERC-1155 allows the creation of multi-class tokens, meaning that different types of tokens can be created on the same blockchain development.

Conclusion

Token Standards are code templates that allow for uniform and faster development, to facilitate compatibility between projects. It is important to know the different types, not only because of the code discussed here, but also to study how each one behaves or is used. Only then will you be able to create projects and invest in successful projects.