- There several different types of Ethereum token out there that it can be confusing to know which is which
- Ethereum ERC tokens have different functions and characteristics
- Our handy guide breaks down the different types of Ethereum ERC tokens for you
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 ERC-20 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 ERC-20 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 ERC-20 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. NFTs on the Ethereum blockchain are typically of the ERC-721 standard, and their huge growth is reflected by the fact that ERC-721 topped Art Review’s annual Power 100 in 2021.
ERC-721 typically represent collectibles such as Bored Apes, Crypto Punks and the like, with each one being worth a different amount based upon a variety of factors specific to it. This makes ERC-721 tokens 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 before you send your six-figure NFT there.
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 both 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, including Ethereum-based DeFi platforms, and this doesn’t look set to change anytime soon. The NFT explosion has seen a huge growth in the 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 DeFi still rolling out project using the ERC-20 standard and Ethereum working hard on its upgrade to Ethereum 2.0, it seems that ERC-20 tokens are going to be the leading light in the decentralized currency world for many years to come.