Token Showdown: ERC-20 vs. ERC-721 vs. ERC-1155 – Who Will Rule the Blockchain Arena?

The world of tokens and coins is influenced by cryptography, cypherpunks, and blockchain technology. Tokens are unique digital tools used for various purposes. The NFT market is booming with various token standards that represent unique digital assets. Ethereum’s ERC-20, ERC-721, and ERC-1155 are three major protocols approved by the Ethereum blockchain. Each protocol supports the degree of fungibility and the evolution of NFTs. In this blog, you will learn about what are tokens and three token standards in detail while evaluating each protocol to determine who can rule the future. Let’s start;

Understanding Tokens

Tokens come in many forms, sometimes they a shiny coins but not always. It’s a representation of value that gives a concept of being an integral part of humanity for thousands of years. In early times they came in the form of contained shells and rocks and nowadays we are familiar with things such as money, casino chips, tickets, reward points, and more. As blockchain and cryptocurrency reached mass adoption, there came 6 main types of tokens in the Web3 world. Platform tokens, transactional tokens, utility tokens, security tokens, and governance tokens are essential components of smart contract platforms. Platform tokens protect against abuse, transactional tokens represent value, utility tokens provide access to services, security tokens require regulatory oversight, and governance tokens allow holders to participate in platform decision-making processes.

What are ERC Token Standards?

Tokens are considered digital assets that run on blockchain platforms. They represent specific functionalities. ERC-20, ERC-721, and ERC-1155 are essential token standards in the blockchain arena. Each token represents its characteristics by leveraging blockchain technology’s security, transparency, and record transactions on a distributed ledger. But what is an ERC token standard? ERC stands for “Ethereum Request for Comment”. ERC token standards are guidelines for Ethereum tokens that ensure their seamless interaction.  These standards have received approval and support from the Ethereum community. They have applications in a variety of industries. Smart contract standards govern the creation of smart contracts and decentralized applications. These are critical to understanding the Ethereum ecosystem. They address token standards, library structures, formatting guidelines, name registries, and other specifications. Let’s explain each type one by one in detail;

1. ERC-20 Token

ERC-20, or Ethereum Request for Comment 20 runs on the Ethereum blockchain. Ethereum allows for the creation of fungible tokens that can be exchanged one-for-one. This feature makes them ideal for representing currencies, utility tokens, or other assets. It was first introduced in 2015 and then integrated into the Ethereum blockchain in 2017. This token standard has a common use case in the decentralized ecosystem for a variety of purposes. It is a set of guidelines for managing certain actions within the blockchain. The majority of its users are organizations and governing bodies. In addition, ERC-20 is a fungible token that can be used to represent identical entities. This makes it useful for stablecoin development, ICO (Initial Coin Offerings), crowdfunding, and other similar events.

Features

• Completely interchangeable, suitable for use as digital currencies or utility tokens
• Compatible with a wide range of decentralized applications (DApps), wallets, and exchanges due to their standardization.
• Can be transferred between Ethereum addresses in the same way that ETH can be sent.

Example

contract ERC20 {
  event Transfer(
    address indexed from,
    address indexed to,
    uint256 value
  );
  
  event Approval(
    address indexed owner,
    address indexed spender,
    uint256 value
  );  function totalSupply() public view returns(uint256);
  
  
  function balanceOf(address who) public view returns(uint256);
  
  function transfer(address to, uint256 value) public returns(bool);
  
  function allowance(address owner, address spender)
    public view returns (uint256);
  
  function transferFrom(address from, address to, uint256 value)
    public returns (bool);
  
  function approve(address spender, uint256 value)
    public returns (bool);
}

ERC-721

The ERC-721 token standard is designed to simplify the creation of non-fungible tokens (NFTs). It defines methods and events for token transfers and balances, and each NFT is assigned a unique numerical identifier (uint256) called TokenID. This ensures that NFTs are unique even if they originate from the same smart contract. ERC-721 tokens are used to create collections, each with its own TokenID.  ⇒ NFTs are non-fungible, which means they cannot be exchanged for replicas, as opposed to the Mona Lisa painting.  ⇒ In the blockchain world, NFTs such as Cryptopunks cannot be exchanged for replicas because only the original Cryptopunk NFT can be identified and verified on the blockchain. NFTs have various applications.

Features

• Standards for non-fungible tokens (NFTs).
• One-of-a-kind tokens representing unique assets like digital art, virtual real estate, or collectible cards.
• Can be used to prove ownership and provenance of digital assets.
• Compatible with various marketplaces for seamless buying, selling, and trading of unique assets.

Example

 

contract ERC721 {
  event Transfer(
    address indexed _from,
    address indexed _to,
    uint256 _tokenId
  );  event Approval(
    address indexed _owner,
    address indexed _approved,
    uint256 _tokenId
  );  function balanceOf(address _owner) 
    public view returns (uint256 _balance);  function ownerOf(uint256 _tokenId)
    public view returns (address _owner);    function transfer(address _to, uint256 _tokenId) public;  function approve(address _to, uint256 _tokenId) public;    function takeOwnership(uint256 _tokenId) public;
}

ERC-1155

A multi-token, hybrid standard works between ERC-20 and ERC-721 standards. It is versatile in ways that it can represent both the fungible and non-fungible assets within a single contract.  ⇒ However, flexibility makes ERC-1155 tokens a powerful choice for various applications, allowing developers to optimize gas costs and improve scalability. It is intended to create an interface capable of managing any number of token types, both fungible and non-fungible.  ERC-1155 Contracts and TokenID use TokenID, similar to ERC-721, but with unique identifiers representing configurable token types. Each unique identifier has attributes like supply and metadata. If the supply is set to 1, the token is an NFT. It includes token transfers and account balance checks. It also addresses the limitations of ERC-20 and ERC-721.

Features

• Multi-Fungibility
• Scalability
• Reduced Gas Costs

Example

// ERC-1155
function safeBatchTransferFrom(
address _from,
address _to,
uint256[] calldata _ids,
uint256[] calldata _values,
bytes calldata _data
) external;

Comparing: ERC20 vs. ERC721 vs. ERC1155

Want to create any kind of token on the Ethereum blockchain? You need to know the difference between ERC-20, ERC721, and ERC1155, so you can choose the right token standard that perfectly aligns with your business-specific needs.

• ERC20 is the original standard for fungible tokens on Ethereum, created in 2015. ERC721 was the first standard for non-fungible tokens (NFTs), while ERC1155 allowed for both fungible and non-fungible tokens to coexist on a single smart contract. 
• ERC20 tokens are fungible, meaning each token is identical and interchangeable, while ERC721 tokens are unique, and used to represent digital items like art, collectibles, and game items. ERC1155 introduced batch transfers, allowing multiple assets to be transferred together atomically. 
• ERC20 contracts control total supply and balances in plain sight, while ERC721 relies on approval/transfer from flows with off-chain metadata storage. ERC1155 improves interoperability by supporting batch transfers of fungible and non-fungible assets. 
• ERC20 and ERC1155 are used in various use cases, including stablecoins, branded digital assets, in-game assets, and both fungible and non-fungible assets.

Comparison ERC20 vs. ERC721 vs. ERC1155

Token	ERC-20	ERC-721	ERC-1155
Launch date	19 NDV 2015	24-Jan-18	17-Jun-18
Created by	Ethereum Developers	William Entrikun	Witek Radomski
Fungibility	Fungible	Non-Fungible	Both
Key Features	Fungibility Compatibility Transferability	Non-Fungible its Ownership and Provenance Interoperability	Multi Fungibility Scalability
Efficiency	Requires and common smart	Requires unique smart contracts for each token	Requires 8 single smart contracts for infinite tokens
Adoption	Cryptocurrencies Utility Tokens	NFTs	Gaming and DeFi application

Which Token Standard will Rule the Blockchain Arena? 

The future of blockchain token standards is uncertain, as each has its unique strengths and weaknesses. But, after evaluating the trifecta of token standards we can say ERC-20 is a popular choice for fungible tokens, but its lack of features for non-fungible or multi-type assets limits its application. ERC-721 is ideal for non-fungible tokens like digital art and collectibles, but not for fungible assets. ERC-1155 offers flexibility by allowing both fungible and non-fungible elements within a single token, but its complexity may deter adoption in simpler applications.  Instead of focusing on which token standard will “rule,” it is more accurate to say that different standards will coexist and cater to different needs within the blockchain ecosystem.

What’s next after ERC20, ERC721 and ERC1155?

Ethereum is preparing to launch an ERC token standard 3475 which typically is designed to facilitate the creation of tokens capable of managing multiple callable or redeemable bonds. ERC3475 standard enables businesses to store collective bond information, launch new bond types, and incorporate new features into existing bonds, critical to the growth of the decentralized finance market. Moreover, it functions similarly to ERC-20. It requires separate smart contracts for each token. It enables bond issuers to perform multiple bond redemptions, representing a significant breakthrough in the existing decentralized bond market infrastructure. However, ERC-3475 can efficiently manage multiple redeemable bonds and store large amounts of data while consuming little gas, making it cost-effective.

End Note

New token standards are launching, which means that the world of NFTs is going dynamic and NFTs are futuristic, but selecting the appropriate token standard is important for businesses and individuals. Understanding the specific strengths and challenges of various token standards is important for staying ahead of the curve. ERC-20, ERC-721, and ERC-1155 provide distinct functionalities that address different needs within the NFT ecosystem. Estimating the future king of token standards is a risky endeavor, but accepting the limitless potential of NFT technology is critical. You can thrive by partnering with an experienced NFT development services provider who can help you navigate the complexities of token standards and select the one that best fits your vision. Our team of experts will walk you through the unique challenges and strengths of each standard, transforming your business or personal endeavors into thriving NFT success stories.