Exploring token standards in the Ethereum ecosystem

Key takeaways:
Token standards define common rules and interfaces for tokens on Ethereum.
Popular standards include ERC-20 (fungible tokens), ERC-721 (NFTs), and ERC-1155 (multi-token standard).
Token standards offer benefits like interoperability, ease of integration, user experience, and market liquidity.

Token standards play an instrumental role in the Ethereum ecosystem by defining common rules and interfaces for creating and managing tokens on the blockchain. These standards ensure interoperability, compatibility, and ease of use across various decentralized applications (DApps), wallets, and exchanges.

What are token standards?

Token standards are rules and specifications defining how tokens behave and interact within the Ethereum network. They establish common interfaces, methods, and properties that tokens must adhere to to be compatible with other Ethereum-based applications and contracts.

Popular token standards

ERC-20

ERC-20 is one of the most widely adopted token standards on the Ethereum blockchain. It defines a set of six mandatory and three optional events that tokens must implement to be ERC-20 compliant. These functions include methods for transferring tokens, querying balances, and approving token spending.

Interface of ERC-20

ERC20 tokens provide functionalities to:

Transfer tokens
Enable others to transfer tokens on the token holder’s behalf

Here is the interface for ERC20:

// SPDX-License-Identifier: MIT
pragma solidity ^0.5.12;
interface IERC20 {
    function totalSupply() external view returns (uint256);
    function balanceOf(address account) external view returns (uint256);
    function transfer(address recipient, uint256 amount)
        external
        returns (bool);
    function allowance(address owner, address spender)
        external
        view
        returns (uint256);
    function approve(address spender, uint256 amount) external returns (bool);
    function transferFrom(address sender, address recipient, uint256 amount)
        external
        returns (bool);
    event Transfer(address indexed from, address indexed to, uint256 value);
    event Approval(address indexed owner, address indexed spender, uint256 value);
}

Explanation

Here is the explanation of the above-mentioned ERC-20 interface:

Interface functions:
- Line 5: totalSupply() returns the total supply of tokens.
- Line 6: balanceOf(address account) returns the balance of tokens owned by the specified account.
- Line 7: transfer(address recipient, uint256 amount) transfers a specified amount of tokens from the caller’s account to the recipient. Returns a boolean indicating whether the transfer was successful.
- Line 10: allowance(address owner, address spender) returns the amount of tokens that the spender is allowed to spend on behalf of the owner.
- Line 14: approve(address spender, uint256 amount) allows the spender to spend a specified amount of tokens on behalf of the caller.Returns a boolean indicating whether the approval was successful.
- Line 15: transferFrom(address sender, address recipient, uint256 amount) transfers a specified amount of tokens from the sender’s account to the recipient. The caller must have been approved by the sender to spend the specified amount. Returns a boolean indicating whether the transfer was successful.
Events:
- Line 19: Transfer(address indexed from, address indexed to, uint256 value) triggered when tokens are transferred from one address to another.
  - from: The address from which the tokens were transferred.
  - to: The address to which the tokens were transferred.
  - value: The amount of tokens transferred.
- Line 20: Approval(address indexed owner, address indexed spender, uint256 value) triggered when approval is granted for a spender to spend tokens on behalf of an owner.
  - owner: The owner granting approval.
  - spender: The address allowed to spend tokens on behalf of the owner.
  - value: The amount of tokens approved for spending.

ERC-721

ERC-721, the Non-Fungible Token (NFT) standard, introduced the concept of unique, indivisible tokens on the Ethereum blockchain. Each ERC-721 token is unique and can represent ownership of a specific asset, such as digital art, collectibles, or real estate. This standard enables the creation and trading of unique digital assets with provable ownership and scarcity.

Interface of ERC-721

Here’s the interface code for ERC-721:

// SPDX-License-Identifier: MIT
pragma solidity ^0.5.12;
interface IERC721 {
    event Transfer(address indexed from, address indexed to, uint256 indexed tokenId);
    event Approval(address indexed owner, address indexed approved, uint256 indexed tokenId);
    event ApprovalForAll(address indexed owner, address indexed operator, bool approved);
    function balanceOf(address owner) external view returns (uint256 balance);
    function ownerOf(uint256 tokenId) external view returns (address owner);
    function safeTransferFrom(address from, address to, uint256 tokenId) external;
    function transferFrom(address from, address to, uint256 tokenId) external;
    function approve(address to, uint256 tokenId) external;
    function getApproved(uint256 tokenId) external view returns (address operator);
    function setApprovalForAll(address operator, bool _approved) external;
    function isApprovedForAll(address owner, address operator) external view returns (bool);
}

Explanation

Here is the explanation of the above-mentioned ERC-721 interface:

Interface functions:
- Line 9: balanceOf returns the balance of tokens owned by a specific address.
- Line 10: ownerOf returns the owner of a specific token.
- Line 11: safeTransferFrom safely transfers a specific token from one address to another.
- Line 12: transferFrom transfers a specific token from one address to another.
- Line 13: approve grants approval to a specific address to transfer a specific token.
- Line 14: getApproved returns the address approved to transfer a specific token.
- Line 15: setApprovalForAll grants or revokes approval for a specific operator to transfer all tokens of a specific owner.
- Line 16: isApprovedForAll returns whether a specific operator is approved to transfer all tokens of a specific owner.
Events:
- Line 5: Transfer indicates that a token has been transferred from one address to another.
- Line 6: Approval indicates that approval has been granted for a specific token.
- Line 7: ApprovalForAll indicates that approval has been granted for all tokens of a specific owner to a specific operator.

ERC-1155

ERC-1155 is a multi-token standard that allows for the creation of both fungible (ERC-20-like) and non-fungible (ERC-721-like) tokens within a single contract. It provides more flexibility and efficiency compared to deploying separate contracts for different types of tokens, making it ideal for projects with complex tokenomicsThe economic study models behind a cryptocurrency token or crypto asset. or diverse digital asset ecosystems.

Interface of ERC-1155

Here’s the interface code for the ERC-1155 token standard:

// SPDX-License-Identifier: MIT
pragma solidity ^0.5.12;
interface IERC1155 {
    event TransferSingle(address indexed _operator, address indexed _from, address indexed _to, uint256 _id, uint256 _value);
    event TransferBatch(address indexed _operator, address indexed _from, address indexed _to, uint256[] _ids, uint256[] _values);
    event ApprovalForAll(address indexed _owner, address indexed _operator, bool _approved);
    event URI(string _value, uint256 indexed _id);
    function balanceOf(address _owner, uint256 _id) external view returns (uint256);
    function balanceOfBatch(address[] calldata _owners, uint256[] calldata _ids) external view returns (uint256[] memory);
    function setApprovalForAll(address _operator, bool _approved) external;
    function isApprovedForAll(address _owner, address _operator) external view returns (bool);
    function safeTransferFrom(address _from, address _to, uint256 _id, uint256 _value, bytes calldata _data) external;
    function safeBatchTransferFrom(address _from, address _to, uint256[] calldata _ids, uint256[] calldata _values, bytes calldata _data) external;
}

Explanation

Here is the explanation of the above-mentioned ERC-1155 interface:

Interface functions:
- Line 10: balanceOf(address _owner, uint256 _id) returns the balance of a specific token _id owned by the specified _owner.
- Line 11: balanceOfBatch(address[] calldata _owners, uint256[] calldata _ids) returns an array of balances of multiple tokens _ids owned by multiple addresses _owners.
- Line 12: setApprovalForAll(address _operator, bool _approved) grants or revokes approval for the _operator to transfer all tokens on behalf of the caller _owner.
- Line 13: isApprovedForAll(address _owner, address _operator) returns whether the _operator is approved to transfer all tokens on behalf of the _owner.
Events:
- Line 5: TransferSingle(address indexed _operator, address indexed _from, address indexed _to, uint256 _id, uint256 _value) triggered when a single token _id is transferred from _from to _to.
  - _operator: The address initiating the transfer.
  - _from: The address from which the token is transferred.
  - _to: The address to which the token is transferred.
  - _id: The ID of the token transferred.
  - _value: The amount of the token transferred.
- Line 6: TransferBatch(address indexed _operator, address indexed _from, address indexed _to, uint256[] _ids, uint256[] _values) triggered when multiple tokens _ids are transferred from _from to _to.
  - _operator: The address initiating the transfer.
  - _from: The address from which the tokens are transferred.
  - _to: The address to which the tokens are transferred.
  - _ids: An array containing the IDs of the tokens transferred.
  - _values: An array containing the amounts of the tokens transferred.
- Line 7: ApprovalForAll(address indexed _owner, address indexed _operator, bool _approved) triggered when approval is granted or revoked for the _operator to transfer all tokens on behalf of the _owner.
  - _owner: The address granting or revoking approval.
  - _operator: The address being granted or revoked approval.
  - _approved: A boolean indicating whether the approval is granted (true) or revoked (false).
- Line 8: URI(string _value, uint256 indexed _id) triggered when the URI for a token _id is updated.
  - _value: The new URI value.
  - _id: The ID of the token for which the URI is updated.

Importance of token standards

Token standards offer several benefits to developers, users, and the Ethereum ecosystem as a whole:

Interoperability: Standardized interfaces enable tokens to seamlessly interact with various DApps, wallets, and exchanges, fostering interoperability and compatibility.
Ease of Integration: Developers can leverage existing token standards to quickly integrate token functionality into their applications, reducing development time and effort.
User Experience: Standardized token interfaces provide a consistent user experience across different platforms and applications, enhancing usability and accessibility.
Market Liquidity: Token standards facilitate the creation and trading of tokens on decentralized exchanges (DEXs) and other trading platforms, contributing to market liquidity and efficiency.

Test yourself

Before moving on to the conclusion, test your understanding:

Conclusion

Token standards are essential building blocks of the Ethereum ecosystem, providing common rules and interfaces for the creation, management, and exchange of tokens on the blockchain. By adhering to established standards such as ERC-20, ERC-721, and ERC-1155, developers can ensure compatibility, interoperability, and usability of their tokens across a wide range of decentralized applications and platforms. Understanding and leveraging token standards is key to unlocking the full potential of decentralized finance (DeFi), non-fungible tokens (NFTs), and other blockchain-based innovations.

Frequently asked questions

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What is the token standard on Ethereum?

These are standards that provide a framework for developers to create and interact with tokens on the Ethereum blockchain, ensuring consistent behavior and compatibility across different applications.

What is a token in Ethereum?

The token is a unit of value that can be created, exchanged, and stored on the Ethereum blockchain.

What are six of the standard fields of Ethereum transactions?

Here are six of the standard fields of Ethereum transactions:

Nonce: A unique number associated with each transaction from an account, preventing replay attacks.
Gas price: The amount of Ether a sender is willing to pay per unit of gas to execute the transaction.
Gas limit: The maximum amount of gas a sender is willing to spend on a transaction.
To: The address of the recipient of the transaction.
Value: The amount of Ether being transferred in the transaction.
Data: Optional data field for additional information or instructions to be executed by a smart contract.

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