Token Standards Compared: ERC-20 vs. ERC-721 vs. ERC-1155

Token Standards Compared: ERC-20 vs. ERC-721 vs. ERC-1155

Understanding Token Standards

In the realm of blockchain technology, token standards serve as blueprints for developing fungible and non-fungible tokens (NFTs). Ethereum, as the leading smart contract platform, has established several token standards, most notably ERC-20, ERC-721, and ERC-1155. Each of these standards caters to different use cases, playing a crucial role in the functionality and usability of various applications built on the Ethereum blockchain.

ERC-20: The Fungible Token Standard

Overview and Features

ERC-20 is the most widely recognized token standard. Introduced in 2015, it facilitates the creation of fungible tokens, meaning each unit is interchangeable with another (like currency). This standard comprises six essential functions:

1. totalSupply(): Returns the total supply of the token.
2. balanceOf(address _owner): Gives the balance of the specified address.
3. transfer(address _to, uint256 _value): Transfers a specified amount of tokens to a given address.
4. transferFrom(address _from, address _to, uint256 _value): Allows a delegate to transfer tokens on behalf of another address.
5. approve(address _spender, uint256 _value): Approves another address to spend a specified number of tokens.
6. allowance(address _owner, address _spender): Shows the remaining number of tokens that a delegate is allowed to spend.

Use Cases

ERC-20 tokens are primarily used for cryptocurrencies, utility tokens, and any application relying on fungible assets. Prominent examples include USDT (Tether), LINK (Chainlink), and DAI (a stablecoin).

Pros and Cons

Pros:

• Universality: ERC-20 tokens are widely acknowledged and can be easily integrated into wallets, exchanges, and dApps (decentralized applications).
• Flexibility: Developers can create tokens quickly and efficiently.

Cons:

• Lack of uniqueness: Each token is indistinguishable from another, limiting certain applications.
• Standardization can lead to congestion if many projects use the same contract functions.

ERC-721: The Non-Fungible Token Standard

Overview and Features

ERC-721, proposed in 2018, is the standard for non-fungible tokens, which are unique digital assets that cannot be exchanged on a one-for-one basis like cryptocurrencies. Each ERC-721 token has distinct attributes and represents ownership of a specific item or piece of content. Key functions include:

1. balanceOf(address _owner): Returns the number of NFTs owned by a specific address.
2. ownerOf(uint256 _tokenId): Returns the owner of a specified token.
3. transferFrom(address _from, address _to, uint256 _tokenId): Transfers ownership of a specific NFT.
4. approve(address _approved, uint256 _tokenId): Approves another address to manage a specific token.
5. getApproved(uint256 _tokenId): Returns the approved address for a specific token.
6. setApprovalForAll(address _operator, bool _approved): Approves or revokes approval for an operator to manage all of the sender’s assets.

Use Cases

ERC-721 tokens are utilized mainly in the gaming industry, digital art, and collectibles. Popular projects include CryptoKitties, Decentraland, and various digital art marketplaces.

Pros and Cons

Pros:

• Uniqueness: Each token can possess unique traits, making them ideal for collectibles.
• Provenance verification: Their distinctiveness allows clear record-keeping for ownership and transactions.

Cons:

• Complexity in transfers: Compared to ERC-20, transferring multiple NFTs requires separate transactions, complicating processes for users.
• Higher development costs: Due to the uniqueness of each token, implementing the ERC-721 standard may involve more intricate smart contracts.

ERC-1155: The Multi-Token Standard

Overview and Features

ERC-1155, introduced in 2018, is a revolutionary concept that allows a single smart contract to manage multiple token types. It incorporates both fungible and non-fungible tokens within one contract. Its principal functions include:

1. balanceOf(address _owner, uint256 _id): Returns the balance of a specific token type held by a particular address.
2. balanceOfBatch(address[] _owners, uint256[] _ids): Retrieves the balances of multiple tokens for multiple addresses in a single call.
3. safeTransferFrom(address _from, address _to, uint256 _id, uint256 _amount, bytes data): Safely transfers a specific amount of tokens from one address to another.
4. safeBatchTransferFrom(address _from, address _to, uint256[] _ids, uint256[] _amounts, bytes data): Safely transfers multiple tokens in a single transaction.
5. setApprovalForAll(address _operator, bool _approved): Approves an operator to manage several token types on behalf of the owner.

Use Cases

The versatile nature of ERC-1155 makes it suitable for gaming (where users may need both currency and unique items), collectibles, and any scenario requiring multiple token types. Platforms like Enjin are leading the way in utilizing ERC-1155 for gaming assets.

Pros and Cons

Pros:

• Efficiency: The ability to manage multiple tokens reduces gas fees and transaction costs.
• Versatility: Supports both fungible and non-fungible tokens in one contract, simplifying development.

Cons:

• Complexity: The multi-faceted nature may pose challenges for developers less familiar with smart contract intricacies.
• Adoption: As a newer standard, broader adoption may take time compared to established standards like ERC-20 and ERC-721.

Final Thoughts: Choosing the Right Standard

Selecting the appropriate token standard depends on use case requirements. If the project focuses on fungibility and easy transferability, ERC-20 might be the right fit. For unique, indivisible assets, ERC-721 is ideal. However, for projects that require a combination of both fungible and non-fungible assets, ERC-1155 offers the most flexibility and cost efficiency. Understanding the nuances of each standard is essential for developers aiming to leverage smart contracts on the Ethereum blockchain effectively.