- Ethereum Request for Comments (ERC) are technical documents that outline the standards for programming on Ethereum.
- The most widely used token standard is ERC-20 which enables the creation of fungible tokens on the Ethereum blockchain.
- ERC-721 and ERC-1155 are nonfungible token standards, which means that each token created is unique and not interchangeable.
- The ERC-777 standard is a fungible token standard that allows for more complex token interactions. This is the token standard utilized by the SOMA token.
The creation of the Ethereum network marks a monumental milestone in the evolution of blockchain technology as its smart contract capabilities allowed it to function as an open-source platform designed to launch decentralized applications (DApps).
An important part of the framework for launching new DApps and blockchain protocols on Ethereum are ERCs, which are technical documents that outline the standards for programming on Ethereum. So, what does ERC stand for? ERC stands for Ethereum Request for Comments, and their purpose is to establish patterns that make it easier for applications and contracts on the Ethereum network to interact with each other.
The first ERC token standard to launch on Ethereum was the ERC-20 standard, which remains the most widely used standard to date. Since the creation of the first ERC standard, newer and more specialized standards including ERC-721, ERC-1155 and ERC-777 have been developed to serve specific purposes within the blockchain ecosystem.
Here’s a closer look at each of these standards to get a better sense of the different benefits that each offers to the cryptocurrency community.
ERC-20 – The First Ethereum Token Standard
As mentioned above, the ERC-20 token standard was the first token standard created on the Ethereum network that enabled the ability to create fungible tokens on the Ethereum blockchain. Fungibility refers to the ability for an asset or Token to be exchanged for assets of the same value.
In order for a contract to be ERC-20 compliant, it needs to include six mandatory functions: totalSupply, balanceOf, transfer, transferFrom, approve and allowance. Additional functions that can be added for optimization include things like name, symbol and decimal places.
These functions combined are what make an ERC-20 contract and allow users to perform operations such as querying the total supply, checking balances, transferring funds and giving permissions to other DApps to manage the token for a user.
ERC-20 tokens are designed to be flexible, which allows developers to implement additional features and set specific parameters designed to fit their needs.
ERC-721 – The Non-fungible Token Standard
One of the most promising applications of blockchain technology is in non-fungible tokens (NFTs), and the most prominent framework for the creation of NFTs is the ERC-721 token standard.
The fungibility factor is the main thing that separates the ERC-20 standard from the ERC-721 standard, with NFTs being designed specifically so that each token is unique and thus, not interchangeable.
The creation of blockchain-based NFTs was a revolutionary development as they allow for things like physical property, virtual collectibles and assets with a negative value to be tokenized and managed on a blockchain.
ERC-1155 – The Multi-Token Standard
A more recently developed token standard is ERC-1155, which sought to improve the limitations of both ERC-20s and ERC-721s by enabling a single contract to contain both fungible and nonfungible tokens. This allowed for a greater degree of interoperability and simplicity of use, which has become a valuable benefit to users.
The ERC-1155 standard supports the development of fungible, semi-fungible, non-fungible tokens and other configurations with a common smart contract.
From a functional standpoint, the ERC-1155 standard enabled unique assets to be transferred between different applications with relative ease. Some of the side benefits of the ERC-1155 token standard include the ability to transfer multiple token types at once and save on transaction costs. It also removes the need to “approve” individual token contracts separately for the purpose of trading multiple tokens.
Similar to the ERC-20 standard, ERC-777 is a fungible token standard that is designed to allow for more complex interactions when trading tokens.
One of the most useful features that ERC-777 introduced are hooks, which enable smart contracts to react or perform specific actions when an event occurs and can help prevent lost token scenarios where tokens are sent to the wrong destination addresses.
Another helpful feature is the ability to use operators, which can send tokens on a user's behalf and are intended for use with verified contracts such as an exchange like SOMA.finance. ERC-777 contracts also allow for an emergency recovery function for users who lose their private keys and they are backward compatible with ERC-20 contracts.