What Are Ethereum Tokens? Understanding ERC Standards for Blockchain Development

#ethereum #tokens #erc20 #blockchain

Planning to launch Ethereum based tokens as an entrepreneur? Before diving into development, it’s crucial to understand what Ethereum token standards are and how they can impact your project. This guide will help you understand the key differences between Ethereum coins and tokens, and explore the most widely used Ethereum token standards.

Coins vs. Tokens: What’s the Difference?

In simple terms, coins are independent cryptocurrencies that operate on their own blockchains (like Bitcoin or Ethereum), whereas tokens are built on top of existing blockchains—Ethereum being the most popular choice.

Coins are like native currencies of a blockchain, whereas tokens represent assets or utilities that can run on existing platforms. For example, an ERC20 token is built on Ethereum and doesn’t require its own blockchain infrastructure.

What Are Ethereum Tokens?

Ethereum is a decentralized platform that enables developers to create decentralized applications (dApps) through the use of smart contracts.One of Ethereum’s major innovations is the ability to create new tokens using predefined standards. These standards ensure compatibility, security, and interoperability across the Ethereum ecosystem.

Here’s a quick look at some of the most common Ethereum token standards and their functions:

Common Ethereum Token Standards

1. ERC20 – The Most Popular Token Standard

ERC20 is the most widely used Ethereum token standard, especially for ICOs and fundraising. It defines a set of rules that tokens must follow to function properly within the Ethereum ecosystem.

Benefits of ERC20:

Simplifies token implementation for developers
Ensures a standardized process
High liquidity and ease of exchange
Supports secure and automated transactions via smart contracts

Also read - How to create ERC20 token

2. ERC165 – Interface Detection Standard

ERC165 enables smart contracts to declare the functions they support.It’s particularly useful for other token standards like ERC721 (NFTs), helping smart contracts interact efficiently.

3. ERC721 – The Standard for NFTs

ERC721 enables the creation of non fungible tokens (NFTs)—tokens that are unique and cannot be interchanged. First popularized by CryptoKitties, these tokens are ideal for gaming, digital collectibles, and tokenizing unique assets.

4. ERC223 – Prevent Token Loss

ERC223 aims to solve a major flaw in ERC20: the risk of tokens being lost when sent to incompatible smart contracts. It ensures tokens are only transferred to compatible addresses, adding a layer of protection.

5. ERC621 – Token Supply Flexibility

This standard extends ERC20 by allowing the increase or decrease of token supply. This is useful for businesses that may want to adjust the supply based on market demand or token economics.

6. ERC777 – Enhanced Token Interaction

ERC777 adds advanced features like sending tokens with data and triggering smart contracts automatically. It also allows users to reject tokens from suspicious addresses, increasing security and user control.

7. ERC827 – Third Party Spending Approvals

This standard allows users to approve third parties to spend tokens on their behalf in a single transaction—offering added flexibility for more complex dApp use cases.

8. ERC865 – Pay Gas Fees in Tokens

ERC865 Improves user experience by allowing transaction fees to be paid in tokens rather than Ether.This is especially helpful for users who may not hold ETH, improving accessibility.

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