It all felt like being in a time machine. All off a sudden it felt we are living in future. Though, it was not future and we all are really living it. This is the cause it required tweaks.
Blockchain and then utility token followed by Security token and so on. Nothing was perfect, not everything is correct and future is still having much to show. Tokens came along with problems and they required much more refinement to be deployed at scale; processes took the leap and provisioned standards or better say Token Standard.
There are projects that have never been put a heart into, that are just like
“Tadaa, price goes up ! vrooom, Buy now ! – Vitalik Buterin
Puzzle needed to be solved and risks were needed to be eliminated, so needed were token standards, they support both fungible and non-fungible tokens.
Let’s check top 10 standards being used and coins based on it.
ERC 20 tokens
When we talk about ERC it means Ethereum Request for Comment and #20 is the request specific number assigned to it. It made creation and deployment of tokens easy due to specific set of rules. Attached rules are of two categories optional and mandatory.
Optional rules include:
Name: It denotes token name.
Symbol: It denotes symbol of the token being issued.
Decimal: It denoted the token value to at its minimum. It allowed maximum 18 decimal places.
totalSupply – This defines a specific value which can be referred to as total number of tokens that are in supply in the ecosystem. Once cap is reached no new tokens will be generated by smart contract.
balanceOf – This particular function returns a value which denotes the total number of tokens present in a particular address. It returns a value which contract owners have in their account.
Transfer- This allows to transfer the certain amount of tokens to the user. It increases the user’s wallet with that number of tokens and decreased the same amount from economy supply.
TransferFrom - This functions helps to automate the payment. It automatically transfers the amount by checking all the balances and conditions, if met then only transfer takes place else not.
Approve - After receiving the conformation of number of tokens available, this functions can approve the user so that to collect demanded number of tokens from the smart contract’s specified address. It includes a check against economies’ total token supply so as to remove counterfeiting issue.
Allowance - This checks the balance of the user. If found sufficient then the transfer will execute. It does not focus on total economy supply as approve method is there for it.
It’s was the first standard for token and some of the top ERC20 tokens are Binance Coin, Maker and OmiseGo.
Though each of the 6 mandatory functions are required to be there in a token to become ERC20 token, but it all depends on the token issuer which function to keep and which to not; if any of these functions is not present then the token will not be ERC20.
It not only helped developers but exchanges, coin issuing companies and wallets to manage things as there was a set standard and there was no more need to create everything from the scratch. As nothing comes fully mature, ERC20 came with a flaw and usage of wrong function ended up tokens being lost in contract execution process. They support Fungible assets.
ERC 223 came to resolve issues which ERC20 created and had with its functions. The main problem was tokens being lost in the contract itself.
If someone made a mistake to enter wrong address, an address which never had to receive such tokens then there are Million $ amount which got burnt. ERC223 removed transfer; approve + transferFrom and replaced it with transfer to transfer to wallet and contract both.
If address is Smart Contract address tokenFallback will be called, it makes sure that if receiving contract is not having tokenFallback function then there is no transaction. It definitely addresses the issues related to the ERC20 and then there is more it has with it; it has reverse compatibility and thus support everything which ERC20 supported.
Also it consumes lot less than what ERC20 used to consume; more energy savings. But upgrade is not possible due to smart contracts. As it extends ERC20 they support only Fungible tokens.
ERC20 was limited in one more sense too. It only allowed one token sale and limited the total supply of token in economy. ERC621 is another extension to ERC20 uses totalSupply and allows controlling supply in the economy.
It introduced two new functions to do so increaseSupply and decreaseSupply; wherein increaseSupply allows increasing the total supply anytime and by any amount, new coins can be minted and transferred to the addresses on the other hand decreaseSupply allows reducing the supply by subtracting from the addresses.
It adds a layer which check for balance in the specific address must be equal to the amount being subtracted from the supply. Both these functions are named as safeAdd and safeSub, making it more useful and benefit leveraging tool that too when token economy is growing and need more management of total supply. It solved the issue of ERC20 of single token supply event.
ERC721 strikes the idea of non-fungible tokens in the economy. It describes how to build them. It only defines minimum requirements of smart contracts to allow non-fungible tokens - to own, manage and trade.
It gives free hand to add functionality to tokens. They become more valuable tokens in the sense that they each are unique. Not even one token will be same to that of others. Therefore they are said as non-fungible tokens.
Though it allow smart contract as ERC20 but they are different as they are non-fungible rather than being fungible as ERC20. It was first used in a project, by Axiom Zen, named CryptoKitties. It’s the first ever game based on blockchain technology. It offers crypto collectibles named CryptoKitties which one can buy, sell or just trade. They have unique concept which allow breeding two unique CryptoKitties to create a unique offspring.
This is just one other among CryptoCelebrities and EtherTulips. These can be traded on Emoon.io, RareBits.io and OpenSea.io. Smart Contracts need ERC 165 to be followed due to specific requirements by ERC721.
It makes sense to further develop things when things are being required and demanded with enthusiasm. First thing which makes effectual is it has reverse compatibility.
It reduces the efforts to enact a smart contract. It takes ERC20 things steps further. It includes tokenReceived function, which at an instance verifies the transaction thereby reducing the friction. It reduces time and cost involved and allows making more transactions, thus brings scalability.
Not only this, it follows functions which make it more KYC/AML friendly. Its functions include rejecting any incoming tokens from blacklisted address thereby increasing trust. This also allows adding information for recipient making it more practical. Sender may add remarks for payment and reveal its identity in a way so as to make a transaction more trustworthy and risk free.
This feature is much more comparable with widely used banking system, which can trigger more adoption of this by mass.
This is more approachable and realistic one as it alters the fee payment system. It provides a system in which gas is being replaced with tokens. In this system token holders will be able to pay transfer fee of tokens in token rather than using gas. This was made with motive to make everything simpler, as now a newbie need not understand the whole working concept of ethereum in order to reach at the price and cost of gas.
Apart from this, now there is no need to get appropriate ether to pay for gas which is just a transfer fees. This makes everything very simple resulting in easy adaptability; as earlier there was less interest from a newbie towards decentralized applications.
ERC865 introduces intermediate which is ready to take token and take transaction to blockchain with requisite fee to be made in ether. It is supported and secured by cryptographic signature, removing hustle and clearing the trust issue at a time, by doing everything in single transaction and that too in exchange of tokens and not gas.
An awesome approach to leverage the benefit of Delware General Corporation Law, which now allows using blockchain to manage registries related to shares. It eases the companies in one than one way.
If deployed can be used to raise fund either through the public or private route; remaining compliant to the laws. It extends ERC20 to comply with the laws. It supports all the requirements that require SEC compliant crowdfunding; maintain details of all the parties involved and exchange rate that too off-chain, helping to secure the details.
It meets all the details of “The Act”. It makes sure that each token represents a single share hence removes issue of partial tokens from the system. It brings in place cancelReissue function; it benefits the owners to regain possession of lost tokens. It makes it by allowing transfer agent a place, which accurately maintains every transaction and ownership thus helping the owners of the shares to a great extent.
It brings the new array of implementations to the tokens. These are the new gen token standards. These are Non-Fungible in nature and are composable as well. This means they allow to combine different aspects. Going further they allow combining two tokens as well.
One can combine a fungible ERC20 token with ERC721 non-fungible ones, as ERC 998 tokens. This takes creation and ownership of digital assets a way forward. It’s a tree of digital assets, allowing owning branches of it. The NFT is extension of ERC721.
These can be top-down or bottom-up. Top-down works as a parent having information about child token and transferring parent token transfers child-tokens as well. In bottom-up the functionality goes like having erc721 or ERC20 token with option to be owned by other ERC721 or ERC20 token.
In top down contract have information about child token about all its tokens and in bottom-up its stores information about parent tokens. ERC165 standard is must to be implemented to each ERC998 interface.
In top-down composables for both ERC721 and ERC20, ERC721 interface is must; and in bottom-up ERC998ERC20 will require ERC20 interface and ERC998ERC721 will require ERC721 interface.
It is the latest work done in the field of securities. It brings standards for security tokens on ethereum. It is first implemented by StartEngine and they are the developers as well.
They use LDGR - a DApp which logs each transaction information in regulation CF, D and A securities. They have already issued ERC1450 token to their shareholders. They have brought in place broker-dealer RTA; a record keeper of every transaction being issued under regulation D, regulation S and ATS an Alternative Trading Platform - a place where buyers and sellers meets and it allows them to transact in national securities without major exchanges being there.
It allows tokenizing securities with ease without being interrupted by SEC or FINRA, as this comply with the standards. ERC1450 is being used by StartEngine to tokenize securities and sell it. It removes the hindrance of losing access.
If Private Keys are lost, an user just need to send notarized affidavit, informing transfer agent the loss thereby allowing RTA to cancel the previous tokens and issuing the new ones. It makes things more real life, because one just cannot lose securities, there must solution available for these cases.
Though still, not all ERCs are token, but ERC20, ERC1450, ERC721 and ERC998 are amongst those which are really working as TOKENS in the ethereum economy.
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