Blockchain Token Standards 101

Understanding your assets in smart contract-fueled blockchain

For today’s Aiternalex Blog post we’re diving into the fascinating world of token standards. These standards are like rulebooks that define how tokens interact with each other and the blockchain they’re built on. In this friendly guide, we’ll explore the different token standards on the Ethereum (and EVM-compatible – Ethereum Virtual Machine) blockchain, and then briefly touch on how tokens work in other popular blockchains like Solana and Polkadot. So, grab a cup of coffee and let’s get started!

Ethereum and EVM-Compatible Blockchain Token Standards

Ethereum is a trailblazer in the blockchain space, so it’s only fitting that we start with its token standards. Here are some of the most widely used standards on the Ethereum network:

ERC-20

First up, we have the ERC-20, the “OG” of Ethereum token standards! This standard defines a set of rules for creating and managing fungible tokens, which are tokens with equal value (think of them as digital coins). If you’ve ever traded tokens like BAT or LINK, then you’ve dealt with ERC-20 tokens. Some key functions of the ERC-20 standard include:

• Transferring tokens between addresses
• Checking the balance of an address
• Approving the spending of tokens by a third party

ERC-721

Next, we have the ERC-721 standard, which brought us the world of non-fungible tokens (NFTs). Unlike ERC-20 tokens, each ERC-721 token is unique, making them perfect for digital collectibles, art, and other one-of-a-kind assets. The CryptoKitties craze of 2017 was built on this standard! ERC-721 tokens have similar functions to ERC-20 tokens, but with some notable differences, such as:

Each token has a unique identifier

• Tokens can be transferred, but they can’t be divided
• Metadata can be attached to describe the token’s properties

ERC-1155

The ERC-1155 standard is like the Swiss Army knife of token standards! It combines the best of both worlds, allowing for the creation of both fungible and non-fungible tokens within the same contract. This versatility makes ERC-1155 perfect for gaming platforms, as it can manage in-game currencies, items, and more. Some unique features of ERC-1155 include:

• Batch transfers of multiple token types in a single transaction
• Tokens can have both fungible and non-fungible properties
• Reduced gas fees compared to ERC-20 and ERC-721
• Token Standards on Other Blockchains

While Ethereum is undoubtedly a leader in token standards, it’s essential to look at how tokens work in other blockchain ecosystems like Solana and Polkadot.

Solana

Solana is a high-performance blockchain known for its lightning-fast transactions and low fees. It uses the SPL (Solana Program Library) token standard, which is similar to Ethereum’s ERC-20 standard. SPL tokens are fungible and can be used for various purposes, like decentralized finance (DeFi) and stablecoins. Some key features of SPL tokens include:

• High transaction throughput
• Low gas fees
• Support for cross-chain swaps and bridges

Polkadot

Polkadot’s approach to token standards is unique when compared to Ethereum or Solana. Unlike these platforms, Polkadot doesn’t have a specific, pre-defined token standard for its ecosystem. Instead, it allows individual parachains (independent blockchains) to create and implement their own token standards, providing a high degree of flexibility for projects built on the platform.

This flexibility stems from Polkadot’s core design, which emphasizes interoperability between various blockchains. As such, parachains are encouraged to establish their own token standards that best suit their specific use cases and requirements.

To facilitate seamless communication and token transfers between parachains, Polkadot employs the Cross-Chain Message Passing (XCMP) protocol. This protocol enables different parachains with their own token standards to interact and transfer tokens securely and efficiently.

In essence, Polkadot’s approach to token standards is centered around empowering individual parachains to create custom standards tailored to their needs. This allows for a more diverse range of token implementations and encourages innovation within the Polkadot ecosystem.