ERC-20 and ERC-721 are all Ethereum token standards that introduced fungible, and non-fungible tokens (NFTs) to the network, respectively. But what do they really mean, and how are they relevant to you while trading? In this article, we’ll attempt to answer all that, and tell you everything to know about ERC-20 and ERC-721.
Ethereum allows for the creation of many, different crypto tokens within its ecosystem. To ensure that these tokens have the option to flawlessly interact with their host network and each other, Ethereum introduced token standards, which serve this precise purpose.
Without token standards, many functionalities that we take for granted could not exist in their current forms. Exchanging tokens would be inefficient, or sometimes even impossible, and utilizing DeFi applications would also not be as lucrative as it could be.
ERC-20 is one of Ethereum’s most well-known and widely adopted token standards. It was introduced in 2015, and allowed for the creation of various crypto tokens and entire sub-ecosystems within the network. For those planning to launch their own crypto assets, the benefits of following this standard are obvious: compatibility with and access to all of Ethereum’s functions, exchanges, and other token systems.
ERC-20 is actually a set of simple rules and guidelines that issuers need to adhere to when creating new crypto tokens. These include the obligation to set a total supply for the token, to predetermine various rights with functions, such as transfer, withdrawal, and the sort. Knowing more about ERC-20’s technical requirements is not necessary for most of us, as they are mostly meant for developers and issuers.
Some might be surprised by the amount of popular tokens that are actually ERC-20 compliant. The long list includes Tether (USDT), Uniswap (UNI), Decentraland (MANA), Axie Infinity (AXS), Basic Attention Token (BAT), and many more.
ERC-721 is another token standard of Ethereum, albeit for non-fungible tokens (NFT) this time. This is the go-to NFT standard that the vast majority of uncopyable digital tokens follow. The technicalities of ERC-721 are more complex than those of ERC-20, so for that reason, we will not go into those for now.
We will, however, talk about how this standard could help you decide about your next NFT venture. When browsing through Ethereum-based collections, and looking for something you like, always try to audit your choice by verifying that it’s compliant with the ERC-721 standard. If the collection is said to be launched on Ethereum, but is not ERC-721 compliant, it’s usually best practice to avoid it for the time being.
Famous examples of ERC-721 standard collections include the Bored Ape Yacht Club (BAYC), Azuki, Doodles, and many more renowned pieces.
Ethereum token standards opened new chapters in the front of token creation. Be it fungible of ERC-20, or nun-fungible tokens of ERC-721, these rules are essential parts of a unified Ethereum ecosystem that uses universal compatibility and synergies to grow to a global scale.
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