Summary

Token standards are a set of rules and conventions that govern how cryptocurrency tokens work. Common standards include ERC-20, BEP-20, ERC-721, and ERC-1155.

Introduction

While there are tens of thousands of cryptocurrencies, you may If you don’t know, most cryptocurrencies are created from the same blueprint. These blueprints, also known as token standards, specify the key functions and properties of blockchain tokens.

Why should we follow the token standard?

Interoperability

Token standards ensure that all products built to the same standards can interact or work together. If project tokens are created in compliance with token standards, new tokens can continue to be compatible with existing platforms and applications (such as wallets). For example, ERC-20 assets are interoperable with other products and services developed following the same token standards.

You can trade ERC-20 tokens for other tokens for this reason. And without token standards, trading multiple cryptocurrencies will be very difficult. You also have to create a dedicated wallet for your token, rather than having a wallet that can hold countless cryptocurrencies.

Composability

When developers program, if composable systems are available, they can reuse existing components to create new products. The same goes for token creation, following token standards reduces time spent on basic functionality, giving developers more time to experiment and innovate.

Efficiency

In addition, token standards can also facilitate interactions between smart contracts. After the smart contract deploys tokens according to token standards, it can also play a role in monitoring the created tokens.

Token standards such as ERC-20 and BEP-20 have basic functions such as address retrieval and token balance, so smart Contracts can monitor tokens more effectively. For example, developers can monitor ERC-20 tokens using the contract's Application Binary Interface (ABI) to track token transfers and other data.

Common cryptocurrencies and DeFi token standards

BEP -20

BEP-20 is the token standard of Binance Smart Chain (BSC). The standard is a technical specification developed for Binance Smart Chain (BSC) that enables developers to create a variety of tokens, including pegged tokens, utility tokens, stablecoins, and other tokens. The BEP-20 standard also introduces features such as blacklisting, minting and suspending token destruction.

The following are the main functions of the BEP-20 token standard:

1. TotalSupply:Specifies the total supply of a specific BEP-20 token.

2. BalanceOf: Specifies the token balance.

3. Transfer: Support users to transfer token ownership to others.

4. TransferFrom: Transfer tokens to others on behalf of the user through smart contracts.

5. Approve: Limit the number of tokens that can be withdrawn by the smart contract.

6. Allowance: Defines external addresses that have the right to spend tokens.

ERC-20

In 2015, Fabian Vogelsteller proposed the ERC-20 token standard and later became a developer designing various tokens such as virtual tokens, pledged tokens, and virtual currencies. The main framework on which it is based.

The ERC-20 token standard develops fungible (i.e. non-fungible) assets that follow common rules. So if you create 1,000 ERC-20 tokens, each token has the same functionality.

The BEP-20 standard is similar to ERC-20. Note: But they belong to completely different blockchain networks. The ERC-20 token standard is for the Ethereum blockchain, while BEP-20 is for the BNB Smart Chain (BSC).

ERC-721

Did you know that most non-fungible tokens (NFTs) on Ethereum follow the ERC-721 token standard. Whether it’s a limited edition NFT or a Proof of Attendance Protocol (POAP), your NFT is most likely created from the same blueprint. So what makes NFTs different? The rules stipulate that to become an ERC-721 token, an asset must have a globally unique tokenId.

ERC-721 features include token transfer, current balance, total supply, and global uniqueness as mentioned above .

ERC-1155

As token standards continue to evolve, a guideline has emerged that covers industry needs for multiple token types. ERC-1155 is a multi-token standard that allows the creation of different types of digital assets, including utility tokens like BNB and NFTs.

In addition, ERC-1155 also provides token batching functions, including:

1. Batch transfer: Transfer multiple assets at the same time.

2. Batch Balance: Query the balance of multiple assets in one step.

3. Batch Approval: Approval of all tokens to the same address.

4. NFT support: When the supply is only 1, the token created is considered an NFT.

Limitations of the token standard

Tokens created following the same standards have consistent basic functions and good interactivity, while tokens that follow different standards have inconsistent basic functions and poor interactivity. Because the rules governing token standards are so diverse, it’s not surprising that they are incompatible with each other. In other words, tokens developed to different standards cannot coexist on the same platform or communicate or trade with each other. If you own multiple cryptocurrencies, you may have had the bad experience of not being able to use BTC on Ethereum. To address this limitation, the industry proposes a new token type, also known as wrapped tokens.

Wrapping Token

Wrap tokens are cryptocurrencies that are pegged to other cryptocurrencies. Typically the original asset is placed in a digital vault (aka wrapper) while its wrapped version (avatar) is created on other blockchains.

Conclusion

Token standards are like the blueprint for the design and release of blockchain tokens. Several token standards currently exist in the industry, as well as innovative solutions such as blockchain bridges and wrapping mechanisms that can help resolve incompatibilities between tokens.

Extended reading

• ERC-20 generation Coin Introduction

• Three Popular Cryptocurrency Bridges and Their Working Principles

• How to use Polygon Bridge?

• Detailed explanation of atomic swap