There are more Ethereum token types out there than ever before, and it can be daunting for newcomers to the space, or anyone using an Ethereum wallet come to that, to be absolutely sure what they’re dealing with. Because of this, we’ve put together a handy guide to the most common ERC standards and what they mean to help you through what is an already complex area that will only grow in complexity as time goes on.
Your common-or-garden Ethereum-based token – the kind you bought in 2017 when you invested in that ICO that went bust. Many projects launch at ICO stage with an ERC20 token before moving onto their own chain later down the line and ‘migrating’ the token over. These tokens are fungible, meaning that each token is worth the same as the next and they can be swapped out for different denominations and still retain the same value. The ERC20 standard was proposed back in November 2015, four months after Ethereum itself launched, and is still going strong today. Any wallet that accepts ETH, from the latest hardware wallet to oldest free online one, will accept ERC20 tokens.
Unlike ERC-20 tokens, ERC-721 tokens are non-fungible, meaning that each token, or the representation of that token, is not automatically worth the same as the next. An example of this is digital collectibles like Cryptokitties, EtherMon, or the forthcoming blockchain-based player cards from the likes of the Arsenal, Real Madrid, and Bayern Munich soccer teams. In these cases, each collectible is worth a different amount based upon a variety of factors specific to it (e.g. Real Madrid’s star player is worth more than their third-choice goalkeeper, so the value of their respective cards, and therefore the token, will reflect that).This makes ERC-721 a good alternative token for tokenized securities. Not all wallets accept ERC-721 tokens, but the most well-known wallet providers (MetaMask, Ledger, Trezor, Trust Wallet) do. Make sure you check with your wallet provider first.
ERC-223 tokens are billed as an improvement to some key shortcomings of the ERC platform in general, with lost tokens being the primary one. Over time many thousands of people have mistaken smart contract addresses for wallet addresses, which means that the coins get stuck in the smart contract and cannot be retrieved. ERC-223, which was first proposed in March 2017, allows users to send their ERC tokens to either a wallet or a contract with the same function transfer, thus eliminating the potential for confusion and lost tokens. It also allows developers to reject non-supported tokens and reduces the number of steps required in the transfer process by 50%, saving time and energy. ERC-223 tokens are not readily used or accepted in wallets, so make sure you check with your wallet provider before you send them over)
Billed as another fix for the problems associated with the ERC-20 standard, ERC-777 includes features such as whitelisting operators to prevent transacting with potential bad actors, the ability for developers to know beforehand if a contract has the functions required to receive tokens sent through certain functions, and generally giving developers more options to deal with incoming transactions should they need to. This standard also allows for approved third parties to act on behalf of token holders, allowing tokens to be moved on someone’s behalf in the case of an emergency. Like ERC-223, ERC-777 tokens are very rare, and so aren’t widely accepted, so check with your wallet provider before sending them over if you have some.
ERC-20 Still Leads the Way
Despite the improvements offered by ERC-223 and ERC-777, ERC-20 tokens are still the ‘go-to’ option for most projects that use the Ethereum network, and this doesn’t look set to change anytime soon. As tokenized securities become more popular we may see more use of the ERC-721 format, although asset tokenization platforms are developing their own tokens on the Ethereum standard to meet these requirements (e.g. SRC20, ERC-1400, ERC-14500), so they may have competition in the future. With the ERC-20 format being almost synonymous with ICOs and with so many projects still running on the ERC-20 format in their initial stages, it seems like this relic of the blockchain space still has the legs on its younger, more agile counterparts, although time will tell how long this remains the case.