What token standards are there?

Brief summary

• Token standards provide both ease of token creation and blockchain popularity

• With a token standard, you can fill in properties of a new token via a sort of blueprint and thus quickly create a known form of token, such as a fungible or non fungible token

• To have a token standard you must be able to process blockchain smart contracts

• Ethereum's ERC-20 token paved the way for all token standards that came after it

• Ethereum has come up with some very important token standards, such as ERC-20, ERC-721 (NFT), ERC-1155 (multi-token from Enjin Coin team) and ERC-777 (extension of ERC-20)

• Binance competed with Ethereum in the token standards market, but Ethereum managed to maintain a large lead in terms of popularity

• Nowadays, the Bitcoin network has added a number of standards, such as BRC-20 (NFT) and Bitcoin Runes (fungible tokens).

• Solana invented a special and also successful way (SPL) to launch token standards on their blockchain

• Virtually every blockchain that smart contracts can run on today have token standards

• The prediction is that many token standards will be added in the future

What is a token standard?

A token standard is a set of rules, functions and conditions that govern the operation of a standard crypto token. This set is governed by a smart contract. A token standard can be thought of as a blueprint, created to automate all kinds of functions of coins and tokens, greatly simplifying the creation of tokens.

Such a smart contract regulates the parameters that are associated with a specific blockchain hear. The best-known parameters are those of the ERC-20 token, a token standard on the Ethereum blockchain. It is best known because it is still very widely used.

Smart contracts

Nowadays, more and more token standards are emerging. Any blockchain technology that can work with smart contracts has the ability to create a few of them.

Most token standards govern the creation of a token, creating a NFT or creating a token that has multiple functions. Signal words here are interoperability, composability and efficiency of the token.

The first token standard

Before Ethereum existed, there were no smart contracts and therefore no token standards. You had a few cryptocurrencies into the crypto market without any fuss.

ERC-20 token standard

Very early in Ethereum's history, in 2015, they introduced the smart contract, followed by the ERC-20 token. The ERC-20 token standard was made up so that creating a new cryptocurrency no longer had to be a nightmare and smart contracts on the Ethereum blockchain could communicate with each other. In 2017, this proposal became active.

ERC means Ethereum Request for Comments. The 20 represents the sequence number, so it is one of the first successful and well-known proposals for an EIP (Ethereum Improvement Proposal) on their GitHub page. If your proposal is accepted, a new ERC is born, including a tracking number.

With the ERC-20 standard, you only need to specify a few parameters and in no time you have created your own fungible (redeemable) token. You specify how many tokens there will be, how many the owner retains, send some coins to a certain address, specify the name of the coin and a few more little technical things and voilà, a new token has been created.

New blockchains

Since then, there have been quite a few blockchains that were started this way very cheaply, usually through a ICO. Even very large blockchains that have long been in the top 20 still do not have their own coin, but work with the ERC-20 token from their early days.

Until then, new coins were added gradually, since then there was a small explosion of coins and became tens of hundreds and hundreds of thousands. Although we should add that this is also because nowadays there are quite a few new popular networks with smart contract functionality, so that the creation of a coin can be arranged within a minute.

Why are there token standards?

The presence of token standards on a blockchain with smart contracts makes your blockchain much more popular. After all, you can market your own crypto within a short time without having much technical knowledge.

Several blockchains have noticed this and so more and more blockchain networks are making sure they have token standards in their package.

Many crypto projects also use the standard wrapped token technique, allowing a coin to be rolled up and traded on incompatible blockchains.

Techniques from the Ethereum hat are often adopted 1-to-1 by multiple blockchains, such as the token standard for fungible tokens (ERC-20), non-fungible tokens (ERC-721) and the multi token (ERC-777).

Ethereum blockchain token standards

We just discussed the ERC-20 token, so we're not going to do that again.

Ethereum has a few more well-known and popular standards that we will briefly discuss:

ERC-721

This is a token standard for non fungible (non-exchangeable) tokens, which have come to be known as the NFT. Usually you think of artwork, but actually you can program any kind of non fungible items with ERC-721 into a smart contract.

Forms of unique NFTs

For example, every painting made by hand is unique and therefore an NFT. But a concert ticket with a specific serial number is just as unique, since there is only one of each. So anything that is identifiable and distinct from other things can be described in an ERC-721 through a smart contract.

Generally, an NFT covers items such as physical possessions, virtual collectibles, in-game items and other digital or physical possessions. This standard was made up because ERC-20 cannot work for non-fungible tokens.

Examples of NFT projects on Ethereum

A well-known project built with the ERC-721 standard is CryptoKitties from 2017. Due to its popularity, the Ethereum blockchain became overloaded with requests and many transactions failed and became extremely expensive. CryptoKitties is also poorly known for this.

The ERC-721 standard for the NFT is used today on marketplaces such as OpenSea and Rarible, where mostly digital artworks pass over the counter. In 2021, the NFT became really popular with series like the Bored Ape Yacht Club, Pudgy Penguins, CryptoPunks and great works like the one by Beeple; "Everydays: The First 5000 Days."

ERC-777

This is actually an extension and improvement of the ERC-20 token, with certain events and dependencies running more smoothly and fewer things going wrong.

With the special feature that a hook hot can handle specific parts of a smart contract much better. This token standard can also interoperate with ERC-20.

ERC-777 is often used when an ERC-20 token runs into too many problems or is inadequate.

ERC-1155

This standard was developed by the Enjin coin team from the other token standards on the Ethereum blockchain with the goal of putting together a single smart contract that allows you to manage an infinite number of tokens. You can manage multiple types of tokens with this standard.

The main reason for its development was the problem of ERC-721 tokens. If you want to start creating a large number of NFTs with ERC-721, you have to do a separate transaction for each NFT. This is obviously unworkable if you are going to create 1 billion tokens as in-game NFTs or an NFT series of a few thousand monkeys.

With ERC-1155, you can create them all at once in a single smart contract, which does not strain the speed of the blockchain and greatly reduces transaction costs. With batches, you can do multiple actions at once in a single transaction.

Token standards for other blockchains

Because the ERC-20 token was so incredibly popular and successful during the ICO and DeFi heyday, several blockchain networks watched jealously as Ethereum gained an ever-increasing market share.

One of the first networks to respond was Binance. They marketed the BEP-20 and the BEP-2 token as competition to ERC-20. More on that later.

Any blockchain that worked with smart contracts eventually did not want to be left behind and today you see that many more token standards have been added, giving you many more options in issuing meme coins, standard tokens, DeFi tokens, NFTs and anything else that can run on a smart contract.

Let's take a look at the token standards of other blockchains.

Binance token standards

The main reaction to the ERC-20 token came from Binance. This exchange with its well-stocked pockets wanted to be on top of everything, whether it was token standards, a utility token or a DEX.

BEP-20

This is a token based on ERC-20 and adapted to work within the Binance ecosystem. The full name is Binance Smart Chain Evolution Proposal - sequence number 20, so it is a token standard for the Binance Smart Chain (BSC), which allowed developers to launch all kinds of tokens through the BSC, such as stablecoins, utility tokens, governance tokens, memecoins or tokens linked to other tokens or coins.

BEP-20 is compatible with ERC-20 and thus can also be used in the Ethereum ecosystem via smart contracts. It can also provide functionality within dApps. This token should theoretically be able to compete with Ethereum because of much lower cost and higher speed, but history has shown that the popularity of Ethereum was so great that the vast majority of new tokens joined the Ethereum network anyway.

The most important and well-known application of the BEP-20 token is on PancakeSwap, where the transaction costs were much lower than on an Ethereum DEX like UniSwap and SushiSwap.

BEP-2

This is a token standard aimed purely at the Binance ecosystem without support for smart contracts. It works on the Binance Chain and is mainly used on Binance's CEX and DEX. This standard also allows you to launch a token on the Binance ecosystem within a short period of time.

Other token standards on Binance

Binance also works with a variety of other token standards, but it is going too far to discuss all the remaining tokens in this article. On other ecosystems, we will also discuss only the most important ones, otherwise write the book version.

Binance still works with BEP-8 for smaller companies, BEP-721 for NFT, BEP-777 for advanced smart contracts and BEP-1155 for multi-purpose tokens. You see the same numbers coming back as with Ethereum and that is to indicate that it is the same type of token as with Ethereum.

Bitcoin token standards

It took a long time to create token standards for Bitcoin. In January 2023, Casey @Rodarmor launched the Ordinal on the Bitcoin blockchain.

BRC-20

With this Bitcoin Request for Comment -20 token standard, it became possible to create an NFT on the Bitcoin blockchain through a technique called Inscriptions. In our blog about Bitcoin Runes you can read the bigger story, but at least an Ordinal (BRC-20) caused transaction fees to rise and the speed of the Bitcoin network to drop sharply. It began to resemble the high transaction fees for Ethereum in the heyday of DeFi.

Bitcoin Runes

As the creator of Ordinals saw the effects his creation had on the Bitcoin network, Casey also provided the solution for this. He designed the Bitcoin Runes protocol, which made it easy to create new tokens on the Bitcoin ecosystem. This technique is similar to the ERC-20 technique, but without such high transaction costs if all is well.

Bitcoin Runes is designed to put much less pressure on the Bitcoin blockchain because of much less "junk UTXO" (Unspent Transaction Output). In short, Runes allows you to create a fungible token on Bitcoin with only a few variables, such as ID, Amount, Symbol, et cetera.

This standard could make Bitcoin an even more popular network because of an influx of memecoins and other tokens that can suddenly be launched cheaply and quickly on the Bitcoin blockchain.

While Bitcoin Runes may greatly expand the Bitcoin ecosystem, it is very possible that at some point the Bitcoin blockchain will become even slower and more expensive than Ethereum has ever been.

Solana

Solana has become one of the most popular blockchains in a short time and has been shining at spot 5 in CoinGecko's list for a while now. This is no doubt due to their extensive ecosystem and their super fast and cheap blockchain, but also to the influx of memecoins sold on Solana-based decentralized exchanges.

SPL token

A Solana Program Library (SPL) token can be used to generate both fungible and non-fungible tokens on the Solana blockchain. All of these tokens are compatible with SOL, Solana's native coin. However, SPL tokens are not used for core operations on the Solana blockchain, which must be paid for in SOL.

High SOL price

This largely explains the popularity and high price of the SOL token, because given Solana's large ecosystem, which continues to expand significantly with a flood of memecoins and other coins and tokens, this creates a high demand for SOL that drives up the price.

SPL reproduction

A useful feature of an SPL token is reusability. You can reuse the source code of an SPL token, and by changing a few parameters such as name and amount of tokens, you soon have a new token on a roll.

An SPL token can be created by Minten. That means creating a token on the Solana blockchain by interacting with a smart contract created using Rust, the programming language Solana works with.

For example, if you make an NFT then you set the supply to 1 and remove the decimals. It's a pretty logical process.

An SPL token can be used for an ICO or IEO, for an DAO, as utility token, NFT, DeFi token or RWA (Real World Assets).

SPL memecoins on Solana

What SPL is very much used for is the creation of memecoins, because that is so easy on Solana. Popular communities and meme tokens can quickly lay a foundation for success of their crypto project here, by holding a sort of ICO on Solana, with the partial distribution of the meme coin already arranged in advance. They often choose to sell about half in presale, giving the coin some popularity before it is even on the market.

So the SPL token is very broad in its use.

Token-2022 Program

Solana's token-2022 Program is an extension of SPL tokens, giving them even more functionality. It is also called Token Extensions.

New functionalities that this token controls by default concern two things:

1. Coins. Extensions include confidential transfers, transfer fees, closing mint, interest-bearing tokens, non-transferable tokens, permanent delegate, transfer hook, metadata pointer and metadata.

2. Account. Extensions include memo required on incoming transfers, immutable ownership, default account state and CPI guard.

It goes too far to explain all of this exactly here. The bottom line is that you can do much more with new and existing tokens on Solana. All of these extensions can be mixed into a cocktail that you like best or best suits your purpose.

Cardano

Cardano uses native token functionality to handle things that other blockchains require separate tokens for, such as ERC-20.

EOS

This blockchain network uses the EOSIO.token standard, developed by Block.one, to meet the needs of token standards of EOS.

NEO

NEO Enhancement Proposals (NEP) token standards include NEP-5 for tokenized smart contracts, for example. NEP-11 is used for NFT contracts. NEP-17 specifies interaction between smart contracts.

Tezos

Tezos Interoperability Proposal (TZIP) is the token standard for the Tezos blockchain. TZIP-7 is the equivalent of ERC-20. TZIP-12 is their multi-asset token that allows you to work with the NFT and makes Tezos interoperable.

TRON

Works with the TRC-20 token standard, similar to ERC-20. Their ERC-10 token is designed to launch tokens on the TRON blockchain.

Token standards not yet mentioned

There are many more token standards, such as on the Base blockchain, but it is not feasible to discuss them all. We did discuss the most important ones and that's good enough for this article.

Future token standards

It is certain that significant new token standards will be added over time. For every strongly felt need or problem, there will be a token standard to solve it. While the most obvious issues are represented by a token standard now, the cryptocurrency market is always evolving.

With the arrival of other types of crypto currencies the call for a new token standard will also become audible. Will Ethereum's team then pick up the thread or will another network also make a push?

With the arrival of teams like Solana's and other smart contracts networks, the flush has already grown a lot thicker. It is no longer so lonely at the top, so Vitalik Buterin and his companions may be able to take a vacation from time to time.