TL;DR
Token standards are sets of rules and conventions that govern the behavior of crypto tokens. Popular standards include ERC-20, BEP-20, ERC-721, and ERC-1155.
Introduction
While there are tens of thousands of cryptocurrencies, you might be surprised to learn that most are built on the same foundational frameworks. These frameworks, called token standards, define key functionalities and properties of blockchain-based tokens.
Why Use Token Standards?
Interoperability
Token standards ensure that all products built under the same standard can interact or work together seamlessly. For example, when a project issues a token compliant with a standard like ERC-20, it remains compatible with existing platforms and applications, such as wallets.
Without standardized tokens, trading multiple cryptocurrencies would be significantly harder. Users would also need separate wallets for each token instead of multi-asset wallets.
Composability
In programming, composability allows developers to reuse existing components to build new products. Similarly, token standards save time by providing foundational functionalities, freeing developers to innovate further.
Efficiency
Token standards facilitate communication between smart contracts. Standards like ERC-20 and BEP-20 include critical features—such as address lookup and balance tracking—enabling efficient token monitoring via smart contracts.
Common Token Standards in Crypto and DeFi
BEP-20
BEP-20 is the token standard for the BNB Smart Chain (BSC). It enables developers to launch diverse tokens, including pegged assets, utility tokens, and stablecoins. Key features:
- TotalSupply: Defines the total supply of a BEP-20 token.
- BalanceOf: Retrieves a token holder’s balance.
- Transfer: Allows users to send tokens to another address.
- TransferFrom: Permits delegated transfers via smart contracts.
- Approve: Sets spending limits for smart contracts.
- Allowance: Identifies addresses authorized to spend tokens.
ERC-20
Proposed by Fabian Vogelsteller in 2015, ERC-20 is Ethereum’s fungible token standard. It underpins virtual currencies, staking tokens, and more. Each ERC-20 token unit shares identical functionalities.
While similar to BEP-20, ERC-20 operates on Ethereum, whereas BEP-20 is native to BSC.
ERC-721
Most Ethereum-based non-fungible tokens (NFTs) adhere to the ERC-721 standard. Unique traits:
- Each token must have a globally unique
tokenId. - Supports transfers, balances, and total supply tracking.
ERC-1155
A multi-token standard enabling creation of fungible tokens (like BNB) and NFTs within a single contract. Features:
- Batch Transfers: Move multiple assets simultaneously.
- Batch Balances: Retrieve balances for multiple tokens in one call.
- Batch Approval: Authorize multiple tokens for an address.
Limitations of Token Standards
Tokens under different standards often lack interoperability. For instance, Bitcoin cannot natively interact with Ethereum. Solutions like wrapped tokens and blockchain bridges address these gaps.
Wrapped Tokens
Wrapped tokens peg the value of an asset to another blockchain (e.g., wrapped BTC on Ethereum). The original asset is locked in a custodial "wrapper," enabling cross-chain utility.
Final Thoughts
Token standards serve as blueprints for blockchain tokens. While incompatibilities exist, innovations like bridges and wrapping mechanisms enhance cross-chain functionality.
FAQ
Q: Can ERC-20 tokens be converted to BEP-20?
A: Yes, via cross-chain bridges or centralized exchanges supporting both networks.
Q: Are ERC-721 tokens always NFTs?
A: Yes, ERC-721 defines the NFT standard on Ethereum.
Q: What’s the advantage of ERC-1155?
A: It supports multiple token types (fungible and non-fungible) in one contract, reducing gas fees and complexity.
Q: How do wrapped tokens maintain value?
A: They’re backed 1:1 by the original asset held in reserve.
Q: Is BEP-20 compatible with ERC-20?
A: Technically no, but tools like bridges enable conversions.