Token standard is a set of rules and regulations governing how a crypto token works. ERC-20, BEP-20, ERC-721, and ERC-1155 are some of the popular token standards.

 Introduction

Although there are currently several thousands of cryptocurrencies, you will be surprised to know that most of them are built on the same blueprint. These blueprints are called token standards, which define some of the key functionality and features of blockchain tokens.

Why Use Token Standards?

Interoperability To ensure that all products built using token standards can interact or work together. A new token issued by maintaining the value of the token in a project will remain compatible with existing platforms and applications such as wallets. For example, ERC-20 assets can be developed interoperability with other products and services using the same token standard.

This is why you can trade your ERC-20 tokens to others. It will be very difficult to trade multiple cryptocurrencies in valueless tokens. Instead of using wallets that can hold numerous cryptocurrencies, you need to create specific wallets for specific tokens.

 Composability

Developers can reuse existing components to create new products if programming has a composable system. This also applies to token creation, using token values, requiring less time for basic functionality, so developers have more time to experiment and innovate.

Efficiency

 Token standards also simplify the dealings among smart contracts. Smart contracts follow the value of the token and are used to monitor the token once it has been deployed.

The token standards of ERC-20 and BEP-20 bring essential functions like address recovery and token balancing and allow smart contracts to monitor tokens more efficiently. For example, developers implementing an ERC-20 token use an interface called the Contract Application Binary Interface (ABI) to track token transfers and other data.

Common Token Standards in Crypto and DeFi

BEP-20

BEP-20 is the token standard of the BNB Smart Chain (BSC). Stablecoins, Peggy Coins, Utility Tokens, and many more tokens allow developers to launch technical specifications for BSC. The BEP-20 standard also introduces features such as token burning, blacklisting, minting, and pausing.

Key features of the BEP-20 token standard are as follows:

1. Total Supply: Defines the total token supply of a certain amount of BEP-20 tokens.

2. Transfer: Allows users to transfer token ownership to someone else.

3. TransferFrom: Allows the user to transfer tokens to someone else through a smart contract.

4. Balance of: Specifies the token balance.

5. Authorization: Sets a limit on the number of tokens a smart contract can withdraw.

6. Allowance: Determines the external addresses where tokens are allowed to be spent

 ERC-20

Proposed by Fabian Vogelsteller in 2015, the ERC-20 token standard will later become the main framework for developers to design their own tokens, including virtual tokens, staking tokens, and virtual currencies.

ERC-20 is a token standard that follows common rules for asset development and is interchangeable with each other, eg: fungible.  So if you create an ERC-20 token of 1,000 units, each unit will have the same working capacity.

The BEP-20 standard is again very similar to the ERC-20. Note that they are each part of a separate blockchain network. The BNB Smart Chain (BSC) uses the BEP-20 token standard and the Ethereum blockchain uses the ERC-20 token standard.

 ERC-721

You may know that a large portion of Ethereum's non-fungible tokens (NFTs) share the same token standard, ERC-721. Even if it is a limited version of NFT or Proof of Attendance Protocol (POAP), your NFT was probably created with the same blueprint. Now the question is what makes NFTs unique? However, according to the guidelines to be an ERC-721 token, the asset must have a tokenID that is globally unique.

ERC-721 operations include token transfer, total supply, current balance, and globally unique as previously mentioned.

ERC-1155

As the token standard evolves, a guideline is created to incorporate the various types of tokens required by the industry. Multi-token standards such as ERC-1155 have been used to create a variety of digital assets, including utility tokens such as BNB and NFT.

 Some of the notable features of ERC-1155 tokens include the following:

1. Batch Transfer: Multiple assets can be transferred simultaneously through batch transfer.

2. Batch Balance: Batch balance can be used to restore the balance of multiple assets in one step.

3. Batch Authorization: Batch authorization enables all tokens to be authorized to an address.

4. NFT Support: If the supply of tokens is only 1 then the token is considered as NFT.

 Limitations of Token Standards

Although tokens created in the same standard are in the same queue in terms of basic functionality and can interact well with each other, the results can be different for tokens of different standards. There are many regulations governing the quality of tokens in the industry, which is not surprising as they are not always consistent with each other This means that tokens developed using different standards may be less likely to be on the same platform or they may be unable to communicate or transact with each other. If you are a holder of multiple cryptocurrencies, you may face the problem of not being able to use BTC on Ethereum.

To deal with this limitation, the industry came up with a new genre called wrapped tokens.

Wrapped tokens

Wrapped tokens are tokens that are linked to the value of other tokens in cryptocurrency. Naturally, the original asset is kept in a digital vault called a wrapper, and a wrapped version of it is created on another blockchain, such as an avatar.

 Closing Thoughts

The Token Standard is a blueprint for the design and implementation of blockchain-based tokens. Nowadays, the industry uses several token standards such as blockchain bridges and wrap methods to solve innovation problems and make it easier to resolve inconsistencies between tokens.