The digital asset market continues to attract attention thanks to convenient tools for investment, value storage, and various transactions. One of the key components of the crypto industry is tokens. For effective functioning and ensuring their compatibility with various platforms and applications, special standards have been developed.
What are token standards
Token standards are sets of technical rules and specifications that define the structure and functionality of tokens created on a specific blockchain platform. They establish general principles for creating and interacting with tokens, making digital assets more convenient and transparent for users and developers.
Token standards include unified rules for aspects such as creation, transfer, storage, and management of tokens. They also define basic methods and functions necessary for working with tokens, such as transfer, balance verification, and other actions in the blockchain network blockchain.
The main types of tokens can be identified:
| Token Type | Description | Usage Examples |
|---|---|---|
| Utility tokens | These tokens allow their holders to use certain products or services within the project's ecosystem. | Payment of fees, receiving discounts, or access to additional features in decentralized applications. |
| Security tokens | They grant owners rights to a share of the company's profits or assets, similar to securities like stocks. | Token holders can receive dividends or participate in company management. |
| Investment tokens | Issued as part of ICO to raise funds. Holders of such tokens can earn from the token's price increase or claim a share of the issuer's profits. | Investors acquire tokens with the hope of their price rising or earning income from the issuer's activities. |
The importance of token standards
A token standard is a set of rules, norms, and agreements that define the process of issuing and circulating tokens. This "code" allows systems to automatically manage all processes occurring with digital assets. As a rule, token standards are created specifically for a particular blockchain.
Token standards play an important role in the development of the cryptocurrency ecosystem and provide several key advantages:
- Compatibility and interoperability
Thanks to the "code", tokens issued on one blockchain platform can interact with applications and wallets that support this standard. Thus, members of the crypto community can easily move assets between different platforms. The main condition is the support of the token standard by the platforms.
Token standards also provide developers with ready-made tools and resources for creating various applications and services that work with digital assets. The openness and transparency of the set of rules, which anyone can use, contribute to the development of the blockchain industry.
- Security and reliability
Token standards ensure the security of working with tokens. They establish rules for checks, data encryption, and transaction authenticity analysis, which helps prevent fraud and protect assets.
- Ease of use
Standards unify the process of working with tokens. The user gets a simple and understandable scheme, following which they can perform operations with assets.
Thus, thanks to unified rules — standards, users can easily transfer, store, and manage tokens without delving into the technical details of blockchain operation.
Types of tokens
There are various token standards on the market, each with its own characteristics and intended purposes. Let's consider the main ones.
ERC-20
ERC-20 is the most common token standard on the Ethereum blockchain. It allows for the creation of custom coins, which was one of the reasons for the ICO boom in 2017 and the influx of new tokens into the market. The simplicity of using the standard made it the number one choice for many projects.
ERC-721
ERC-721 is an Ethereum standard designed to create unique tokens, known as non-fungible tokens (NFTs). Each such token has its unique identifier. This standard is widely used in the gaming industry, digital art, and collectibles, where the uniqueness and singularity of each token are important.
ERC-404
ERC-404 is an Ethereum standard that combines the properties of fungible tokens ERC-20 and non-fungible tokens ERC-721. Its goal is to expand the application of NFTs in the decentralized finance (DeFi) ecosystem. This standard is a smart contract template that combines operations with ERC-721 and ERC-20 tokens. The ideas of ERC-404 were used to create a similar token standard — DN-404.
ERC-1155
ERC-1155 is an Ethereum standard that allows the creation of various types of tokens within a single smart contract, making it more versatile. It simplifies the management and exchange of various blockchain assets through their consolidation.
BEP-20
BEP-20 is an analogue of the ERC-20 standard, designed to work on the BNB Smart Chain (BSC) blockchain of the largest cryptocurrency exchange Binance. This standard is used for creating tokens on the trading platform's blockchain.
BEP2
BEP2 is the token standard of Binance's first blockchain — Binance Chain or BNB Beacon Chain. It is required for creating tokens on the exchange's blockchain but is inferior to BEP-20 in functionality, lacking support for batch data transfer and having poorer scalability parameters.
BRC-20
BRC-20 — an experimental token standard on the Bitcoin blockchain, introduced by the Ordinals crypto project, which allows the creation of NFTs on the Bitcoin blockchain. More details about the BRC-20 standard can be found in the special material.
TRC-10
TRC-10 — the primary technical standard for native tokens on the TRON blockchain, providing basic functions for working with tokens on this platform. These assets are intended for value transfer.
TRC-20
TRC-20 — another token standard for TRON, analogous to ERC-20. It is used to create tokens on the project's blockchain and is more functional than TRC-10, with lower transaction fees.
TRC721
TRC721 — the Tron standard for creating non-fungible tokens on the project's blockchain, analogous to ERC-721.
SPL (Solana Program Library)
SPL — the token standard on the Solana blockchain, ensuring high speed and low fees for various operations. Technically, it is an analogue of the ERC-20 standard.
Token standards represent an important set of rules that establish norms for the issuance and circulation of digital assets. Without them, the cryptocurrency market would be chaotic, and transactions with cryptocurrencies would be less convenient and secure.
This "code" simplifies the process of creating, transferring, and managing tokens, increasing the ease of use of digital assets and fostering the development of new cryptocurrency services.
