What are Ethereum token standards?
Ethereum is a blockchain system that allows the creation and transfer of various types of tokens. These tokens have many uses and include those that are fungible, non-fungible, or have other characteristics – and there are a variety of different token standards for each. As Ethereum grew in popularity and people started creating their own smart contracts, there became a need to standardize token and contract creation. ERC-20 is the most prominent standard today.
In short, ERC-20 is a standard or set of rules created by the developers of the Ethereum community that facilitates the interaction of smart contracts, allowing developers to create their own tokens on the Ethereum network. It can be described as a guideline or technical specification.
ERC-20 provides developers with a list of rules to follow that allows for seamless operation within the larger Ethereum platform. It creates a framework that defines what ERC-20 tokens can do by prescribing a list of functions that can be used by them.
What are token standards important?
ERC-20 simplifies the management and creation of tokens. Before the creation of the ERC-20 standard, developers had trouble deciding what terminology to use in their code. This meant that exchanges and wallets had to build their own platforms to be able to accept each new individual token. Most of the tokens launched on Ethereum as initial coin offerings are ERC-20 tokens
As Ethereum development and utility grow, more popular token standards appeared. Among these is the ERC-721 standard, which was designed with the goal of creating exchangeable, unique, and no-expiration tokens. In other words, each token is unique and cannot be destroyed or damaged. This is an NFT token standard. The objectives behind this standard are to create unique tokens and have their intrinsic value given by their rarity.
ERC-721 tokens are also known as deeds of ownership, given that owning such a token shows that the holder has rights to use it. Thus, you have the opportunity to search and collect unique assets with special attributes. However, the applicability of ERC-721 does not stop at online games. With this standard, users can cryptographically secure their various real-life possessions. These can be homes, land, vehicles or they can secure their virtual identity.
With more token and contract standards, building on Ethereum becomes more efficient and accessible. And these assets and their features become extendable to other networks like Oasis as interoperability and multichain tools are developed. In short, token standards set the groundwork for Web3 as we know it today.