From stablecoins to NFTs, token standards define how assets behave on Ethereum. This guide breaks down ERC-20, ERC-721, and newer standards like ERC-1155 and ERC-777—so you understand how different tokens work, why they’re compatible, and how they power today’s Web3 economy.
Have you ever wondered how stablecoins like USDC or NFTs like Bored Apes are built on the same blockchain yet work so differently?
While one can serve as a means for transaction, the other functions as a unique, indivisible asset.
That’s the power of token standards: a predefined blueprint that tells the Ethereum network how tokens should behave and function.
In this guide, we’ll break down two of the most important and popular standards in Web3—ERC-20 (fungible tokens) and ERC-721 (non-fungible tokens)—and explore how newer standards like ERC-1155 and ERC-777 are shaping the next era of tokenization.
Think of token standards as “rules of engagement” on Ethereum.
Just as web browsers follow HTML/CSS standards to display websites properly, blockchains follow ERC (Ethereum Request for Comment) standards to ensure interoperability across wallets, exchanges, and decentralized applications (dApps). ERCs are public proposals for how smart contracts should be designed, creating a shared language for the network.
Without these standards, tokens would exist in silos, impossible to trade or integrate across platforms. These rules specify a minimum set of functions (like transfer or balanceOf) that every compliant contract must implement.
ERC-20 is the most popular Ethereum token standard. It defines a common set of functions every fungible token must implement meaning each token is identical and interchangeable.
That’s why 1 DAI = 1 DAI, no matter who holds it.
Before ERC-20, developers had to write custom smart contracts for each token, often leading to incompatible implementations and security issues. ERC-20 changed that by introducing a universal interface.
Key Functions
Solidity
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.0;
contract ERC20Token {
// State variables
string public name;
string public symbol;
uint8 public decimals = 18; // Corrected: Required by the standard
uint256 public totalSupply;
mapping(address => uint256) public balanceOf;
mapping(address => mapping(address => uint256)) public allowance;
event Transfer(address indexed from, address indexed to, uint256 value);
event Approval(address indexed owner, address indexed spender, uint256 value);
constructor(string memory _name, string memory _symbol, uint256 _totalSupply) {
name = _name;
symbol = _symbol;
totalSupply = _totalSupply;
balanceOf[msg.sender] = _totalSupply;
}
function transfer(address to, uint256 value) external returns (bool) {
require(balanceOf[msg.sender] >= value, "Insufficient balance");
balanceOf[msg.sender] -= value;
balanceOf[to] += value;
emit Transfer(msg.sender, to, value);
return true;
}
function approve(address spender, uint256 value) external returns (bool) {
allowance[msg.sender][spender] = value;
emit Approval(msg.sender, spender, value);
return true;
}
function transferFrom(address from, address to, uint256 value) external returns (bool) {
require(balanceOf[from] >= value, "Insufficient balance");
require(allowance[from][msg.sender] >= value, "Allowance too low");
balanceOf[from] -= value;
balanceOf[to] += value;
allowance[from][msg.sender] -= value;
emit Transfer(from, to, value);
return true;
}
}
Some use cases of ERC-20 standard include stablecoins like USDC, utility tokens, or DAO governance tokens.
If ERC-20 tokens are identical coins, ERC-721 tokens are like collectibles, each one unique and indivisible.
Every ERC-721 token has its own metadata (image, owner, attributes), which is typically represented by the tokenURI function, and can represent digital art, virtual land, or in-game assets.
Some use cases of ERC-721 token include NFTs, digital certificates, or event tickets, each carrying unique data.
What if one contract could handle both fungible (like currency) and non-fungible (like a unique sword) tokens?
That’s ERC-1155. It’s built for efficiency and scalability. It reduces gas fees by batching transfers and storing multiple token types within a single smart contract. It’s commonly used in Web3 games (e.g., Enjin), NFT marketplaces, and dynamic assets.
Think of ERC-777 as ERC-20 with superpowers.
It adds sender and receiver hooks—special functions that let smart contracts react to token transfers (like automated logging or alerts). This improves security and allows smoother integration with other contracts.
If you’re building dApps, you’ll likely need to decide which token standard fits your project’s goals. Here are some questions to help you make a choice:
Understanding these trade-offs helps you design smarter token systems, ones that scale, interoperate, and stay secure.
If you’ve ever interacted with tokens , whether through trading crypto, minting NFTs, or voting in a DAO, you’ve already seen how token standards shape your experience.
Now imagine building one yourself, designing a token that powers local lending pools, digital collectibles, or community reward systems.
If you want to learn more about token standards or even build your own? Join the One Dev developer community, a space where blockchain builders across Africa learn, experiment, and ship real Web3 projects together.
Further Readings
