Token standards are the backbone of Ethereum's thriving ecosystem. They set the rules for creating and using different types of tokens, from fungible cryptocurrencies to unique digital collectibles. Understanding these standards is key to grasping how value moves in the blockchain world.

ERC-20 and ERC-721 are the most important token standards to know. ERC-20 is for regular, interchangeable tokens like cryptocurrencies. ERC-721 is for one-of-a-kind tokens called NFTs, used for things like digital art or virtual real estate.

Token Standards

Ethereum Token Standards

• Token standards provide a common set of rules and interfaces for creating and interacting with tokens on the Ethereum blockchain
• ERC-20 is the most widely used token standard for fungible tokens (cryptocurrencies, utility tokens)
  • Defines a standard interface for fungible tokens, including functions like transfer, balanceOf, and approve
  • Allows tokens to be easily integrated into wallets, exchanges, and other applications
• ERC-721 is the standard for non-fungible tokens (NFTs) (collectibles, unique assets)
  • Defines a standard interface for NFTs, including functions like ownerOf, transferFrom, and approve
  • Each ERC-721 token has a unique token ID, representing a specific asset or item

Token Interfaces and Ethereum Compatibility

• Token interfaces define the functions and events that a token contract must implement to comply with a specific token standard
• Ethereum's smart contract functionality and the ERC token standards enable the creation and management of various types of tokens
  • Tokens can represent assets, utilities, or other forms of value within Ethereum-based applications
• Adhering to token standards ensures compatibility and interoperability with other Ethereum tools and services (wallets, decentralized exchanges)

Token Types

Fungible Tokens

• Fungible tokens are interchangeable and divisible, meaning each token unit is equivalent to any other unit of the same token
• Common use cases for fungible tokens include:
  • Cryptocurrencies (Ether, Bitcoin)
  • Utility tokens for accessing services or products within a specific ecosystem
  • Stablecoins pegged to fiat currencies (USDT, USDC)
• ERC-20 is the most widely adopted standard for creating fungible tokens on Ethereum

Non-Fungible Tokens (NFTs)

• Non-fungible tokens (NFTs) are unique, indivisible tokens that represent ownership of specific assets or items
• Each NFT has a unique token ID, allowing it to be distinguished from other tokens within the same contract
• NFTs are commonly used for:
  • Digital collectibles (CryptoKitties, NBA Top Shot)
  • Virtual real estate and in-game items
  • Tokenized real-world assets (artwork, real estate)
• ERC-721 is the standard for creating NFTs on Ethereum, ensuring a consistent interface for managing and trading unique assets

Token Implementation

Smart Contracts for Token Creation

• Tokens are implemented using smart contracts on the Ethereum blockchain
• Smart contracts define the token's properties, behavior, and functionality
  • Token name, symbol, and total supply
  • Token minting and burning mechanisms
  • Transfer and approval functions
• Solidity is the most common programming language for writing Ethereum smart contracts
  • Developers can create custom token contracts by inheriting from standard token interfaces (ERC-20, ERC-721)

Deploying and Managing Tokens

• Token contracts are deployed to the Ethereum blockchain, making them accessible to users and applications
• Token creators can define initial token distribution (pre-minting, token sales, airdrops)
• Token holders can manage their tokens using Ethereum wallets that support the relevant token standards
  • Wallets enable token transfers, balance checking, and interaction with token-related smart contract functions
• Decentralized exchanges (DEXes) and token management platforms provide additional liquidity and functionality for token trading and utilization (Uniswap, OpenSea)