Today, anyone can create a smart contract based on the Ethereum blockchain and release their own tokens using the ERC20 standard. In this crypto ‘Wild West’, new Ethereum protocols are being created – which are designed to add new functionality or correct errors of previous versions. Let’s start at the beginning: ERC20 & ERC223.
ERC20 & ERC223: The kings of crypto
The ERC20 standard was introduced in 2015 and has seen widespread adoption in just two years. The standard describes the rules of the creation and operation of coins developed on its basis. As with all new things, it contains security flaws.
ERC20 is still the basis for most smart contracts with some additions of ERC223. ERC20 contained a critical bug where funds could be permanently lost when using a wrong transfer function. ERC223 has been introduced by Dexaran to solve this issue. Dexaran calculated that up until the 31st of December 2017, $3,000,000 of funds had been lost due to this bug.
The ERC223 standard introduces a single transfer function that doesn’t make a difference between sending tokens to a token contract or address. In addition, it integrates a token fallback function to avoid accidentally lost tokens inside a contract that is not designed to work with sent tokens. Luckily, almost all token contracts have adopted the ERC223 standard as an addition for ERC20.
Currently, 82% of the projects prefer to use the Ethereum blockchain because of its widespread adoption. Listing an Ethereum token onto an exchange is much cheaper than adding a custom Stellar, Waves, or Nem token. An exchange has to do custom coding to list your ‘exotic’ coin, which makes it much more costly. An Ethereum token can be simply listed by adding the token address and symbol to the exchange interface.
Every day, new tokens are added which are based on the ERC20 standard. The total market capitalisation for Ethereum based tokens is around $36.4 bln. At the time of writing, the total cryptocurrency market cap is around $295 bln. This means that Ethereum based tokens make up 12% of the total market cap. In addition, if you look at the green chart below, you can see a steadily growing amount of token operations.
ERC721: Collectible token – CryptoKitties
Many have heard of the new game on the Ethereum blockchain called CryptoKitties. The new game recently made several headlines within the cryptocurrency community because of the congestion it caused on the Ethereum network. There is more… CryptoKitties is using a different Ethereum token standard.
Standard ERC20 tokens are interchangeable. This means that each ERC20 token is the same, besides its name, ticker symbol, and the number of token decimals. For the CryptoKitties idea, this is not ideal as every token needs to be different. Humans have always loved to collect items, especially when the item is scarce or unique. The value of a collectible item is connected to its rareness among other items.
Thanks to ERC721, we can emulate rare, collectible items with Ethereum tokens. Dieter Shirley created this standard for tokens to be non-fungible and submitted this new Ethereum Improvement Proposal in late 2017.
Small note, recently, the standard has been elaborated with the ERC165 interface. You can find more technical details on the EIP721 page.
ERC827: ERC20 replacement
ERC827 is one of the latest versions of the Ethereum token standards and was called a worthy replacement for ERC20. Unlike its predecessor, this standard can transfer not only the cost, but also the transaction data. This function is added in less than 100 lines of code to the Ethereum network. It expands the functionality of the Ethereum network drastically as it allows users to move data around in a matter of seconds. This allows decentralized applications to perform more complex operations using the transferred data. In addition, this standard allows verifying a transaction by a third party, for example, a broker or agent, without any access to a private key.
As you can see in the above screenshot, ERC827 still addresses ERC20 as its basis. You can see this as it calls the base ERC20 code with the super function.
ERC884: Tokenising Shares
Dave Sag, the creator of the ERC884 standard, wants to use the Ethereum blockchain to register shareholders. ERC884 was created for share registries released by any public or private company in Delaware, and contains several add-ons beyond the capabilities of ERC20. This includes the requirement to identify and whitelist the owners of tokens as an integral part of the very token.
ERC-884 allows for the creation of tradable ERC-20 tokens where each token represents a numberless (or vanilla) share issued by a Delaware corporation.
ERC1070: Standard Bounties
In order to encourage cross-platform interoperability of bounties on Ethereum, and for easier reputational tracking, StandardBounties can facilitate the administration of funds in exchange for deliverables corresponding to a completed task, in a publicly auditable and immutable fashion.
A standardization of these interactions across task types also makes it far easier to track various reputational metrics (such as how frequently you pay for completed submissions, or how frequently your work gets accepted).
ERC998: Composable Non-Fungible Tokens
Matt Lockyer explained the idea behind his Composable Non-Fungible Tokens in his Medium post, “The motivation behind this standard is to create a common interface for standardized tokens on the Ethereum blockchain to be composed into sets and hierarchies. A building block for composable assets. For example: a set of ERC-20 tokens representing an index fund; a virtual backpack of ERC-721 non-fungible tokens (NFTs) and ERC-20 fungible tokens (FTs); complete tokenized accountability of home, appliances, garden and trees, all nested inside a single land title token.”
The token standard is still under development, however, an EIP has already been created on the Ethereum Github.