The True Power Behind Ethereum’s ERC Tokens: What is ERC, what can ERC offer & ERC Examples
While Ethereum was only founded in 2015, it has fast become the second most popular cryptocurrency in the world. Part of this is due to the diverse range of features that the ERC tokens built on this ecosystem offers.
ERC Tokens are sets of specifications or rules that guide Ethereum tokens. Each smart contract that is created on the Ethereum blockchain system will run on one of the ERC tokens. The exact specification of the token (the number that follows it) will change its functionality and adapt its use.
In this article, we’ll be explaining ERC tokens, demonstrating what they can do and why they’ve become so popular.
What is ERC?
ERC tokens are specific functions that can be achieved within the Ethereum system. The most common of these is the ERC-20 token, which has a similar function to cryptocurrency itself; it can be sent, received, traded, and moved.
Each of these tokens has a different main function, providing methods of performing certain actions. For example, the famous NFT network platform OpenSea runs using Ethereum. However, within this, they use the ERC-721 token in order to mint new NFTs. This token is designed explicitly for NFTs as it is itself non-fungible, making this the perfect token for creating uncopyable assets.
Each ERC has a different function and originates from the Ethereum blockchain system.
What can ERC Offer?
ERC tokens are most commonly used to create smart contracts. The most popular token, the ERC-20, is the standard token used to make and issue a smart contract between two parties. These smart contracts are how tokenized assets are traded or created on the Ethereum blockchain system.
The ERC-20 token also represents a range of digital standards that developers can adhere to to create further payment systems. For example, many digital currencies like Basic Attention Token, OMG Network, and Argur all use the ERC-20 as a base for their cryptocurrency.
Mainly, this is because the standards that Ethereum proposes are fixed, making this a possible way of developing a cryptocurrency that has a robust and intelligent contract system already in place.
What can you do with ERC Tokens?
There are two distinct answers to this question, depending on who you are and what you want to do with the ERC tokens. Whether you’re a developer or are a user, what you’ll be able to do with the network of tokens will change.
As a developer, you’ll be able to use the set regulations of the ERC system to create, build, and execute a digital token. As ERC-20 tokens are easy to deploy, you’ll be able to use their standardized set of commands to create interaction rules between different tokens. From there, you’ll be able to create and then execute purchase rules around a new digital currency.
As a user of ERC-20, you’ll be able to exchange any tokens that you have between ERC-20 and USD. Because these are fungible tokens, you can exchange 1-1, changing one ERC for another. Due to this, there is a live and continually updating exchange rate between ERC and USD, meaning you can buy, sell, and trade the currency.
If you’re looking towards the ERC-721 token, you’ll be able to use this currency to mint, sell, and buy NFTs. Every single ERC token has a different purpose. Depending on which ERC token you’re looking at, the range of functions you can perform will change.
What Are Some Examples of ERC Tokens?
On the Ethereum network, there is a range of different ERC tokens that you can use for the development or the creation of smart contracts. Currently, the most significant tokens to take note of are:
Let’s break down what these tokens are, what they do, and why they’re being used by Ethereum on their blockchain ecosystem.
ERC-20 – Standard Token
The ERC-20 is the standard token on Ethereum. It represents a list of standards that all other Ethereum tokens must follow; it’s commonly known as the technical standard on the Ethereum network.
These rules define things such as how tokens can be transferred, how they can be accessed, how they can be approved, and the total supply of the tokens on the network. Due to the stability of this token, developers will be able to accurately understand how the tokens will respond within the Ethereum ecosystem.
Instead of having to manage a currency with continually changing rules, the ERC-20 ensures that developers can plan ahead of time, building tools that run on the tokens without fearing that they will need to redevelop everything in the future.
In terms of function, there are 6 core applications of the tokens. These are general features that you can execute with the ERC-20 token:
- Total supply check
- Check the balance of accounts
- Set an allowance
- Transfer between two wallets
- Approve transactions
- Transfer from one location to another
Due to these functions, the ERC-20 is incredibly diverse in what can be achieved using the token.
ERC-721 – Non-Fungible Token Standard
NFTs have taken the world by storm over the past few years. An NFT, which stands for Non-Fungible Token, identifies something that cannot be reproduced. While ERC-20 tokens are fungible, in that they are all the same, NFT tokens are completely different and cannot be copied.
Due to this, the ERC-721 token is most commonly used for NFT artwork on platforms like OpenSea. These tokens are perfect for creating collectible items like artwork and lottery tickets. Perhaps no other area of NFT use has seen more media attention than that of digital artwork minted into NFTs using the ERC-721 tokens. Assigning each artwork a 721 token makes it singular, not being able to be duplicated.
Thanks to this, sites like OpenSea, which sell NFTs, can ensure that when an artwork is listed, it cannot be duplicated by others, its information is stored on the ERC-721 token in the blockchain. The NFT industry is currently worth over $40 billion, all of which is thanks to the power of the unique ERC-721 tokens.
Another clever use of this token is to create ticket sales. If every seat in a stadium is assigned an ERC-721 token, then tickets can be sold without accidentally selling the same seat to two different people. As these tokens cannot be duplicated, they’re perfect for single-value things like seats in a stadium.
Additionally, ERC-721 tokens are being used within gaming systems on the Ethereum network. Games like CryptoTanks allow users to fight against other online users. They then assign different skins for the tanks with an ERC-721 token. This makes the skin into an NFT, which means it cannot be duplicated.
Due to this, users of these tokens within the game can obtain interesting skins that only they have. The game imparts certain skill boosts with these certain skins, creating an in-game economy that is run off the non-fungibility of the ERC-721 tokens.
ERC-777 Standard Token
The ERC-777 standard token is an improved version of the ERC-20 token. The main difference between these two standard tokens is the concept of a ‘Hook’ within a smart contract.
A smart contract is a program that’s stored on the blockchain which has a set of preset conditions. For example, a contract between a buyer and seller might dictate that when X amount of money is moved, the buyer receives some form of commodity.
Hooks are a line of code within a smart contract. These hooks allow the smart contract to be activated with just one transaction instead of the two transactions that an ERC-20 token requires. This hook increases the speed with which transactions can be registered, helping to cut back on the scalability problem that Ethereum faces.
ERC-777 is also backward compatible, allowing users to replace the ERC-20 tokens that they used in the past.
ERC-1155 Multi-Token Standard
The ERC-1155 Multi-Token brings together the functions of an ERC-20 token and ERC-721 token. Considering that it can perform both of the functions of these two tokens at the same time, the ERC-1155 represents a new step in the functionality of these standards.
The ERC-1155 is a more efficient version of these two tokens, fixing implementation errors that are present in the other, previous versions of the tokens.
There are 6 primary functions of these tokens, some of which are available on ERC-20 and ERC-721, and some of which are not. The functions associated with this token are:
- Safe Transfer Rules – A new set of safe transfer rules allows for secure transactions with this coin.
- NFT Support – If the supply of a token is one, it is treated as an NFT (ERC-721).
- Hooks – Like the ERC-777, this token introduces the concept of hooks to improve upon the ERC-20.
- Batch Transfer – You can group many tokens and transfer multiple assets in a singular cell, which was previously impossible.
- Batch Balance – Retrieve the total value of a set of multiple assets in just one call.
- Batch Approval – Approve the transfer of many tokens to a singular address in one click.
These functions aim to speed up, as well as further regulate, the previous functions of ERC-20 and ERC-721.
Final Thoughts on ERC Tokens
ERC tokens allow users and developers alike to carry out a range of different functions. The beauty of these tokens is their diversity, with a new ERC token covering a distinct set of regulations on the Ethereum network. The wide variety of these tokens has allowed the Ethereum blockchain to become the go-to solution for a range of smart contract functions.
From everything across developing NFTs to executing smart contracts between parties and even launching online games, ERC tokens are incredibly powerful. Considering that Ethereum is continually developing, one can only imagine what they’ll be capable of in the near future as Ethereum continues to develop this unique set of regulation tokens.