Smart contracts and applications developed on the Ethereum blockchain require the creation of different types of tokens according to certain technical rules. As a result of this requirement, token standards such as ERC-20, ERC-721 and ERC-6551 were developed. Each of them provides usage opportunities in many areas, from decentralized finance applications running on Ethereum to games, from NFTs to identity solutions.
Concept of Fungible and Non-Fungible Tokens
In the Ethereum world, tokens are basically divided into two: fungible and non-fungible assets. In fungible tokens, each unit has exactly the same value and characteristics as another unit. For example, cryptocurrencies such as USDC or DAI are included in this scope. Unique tokens, on the other hand, are assets that each have different characteristics and can be tracked individually; NFTs can be cited as an example.
ERC-20: Ethereum’s Base Token Standard
The ERC-20 standard, which emerged in 2015, determines the clear technical conditions for generating and transferring fungible tokens on Ethereum. Popular crypto assets such as Chainlink, Uniswap, USDC were built on this standard. Wallets, exchanges and decentralized finance protocols can easily recognize and integrate tokens created with ERC-20. In this context, the ERC-20 rule set makes the system more compatible and predictable.
ERC-721: The Beginning of the NFT Era
ERC-721 was defined in 2018 and became the first standard used for recording unique digital assets on the blockchain. Famous NFT collections such as CryptoPunks or Bored Ape Yacht Club were created thanks to this standard. ERC-721 makes it possible to store the metadata information of each token separately and display this information in main wallets or marketplaces. It is especially preferred for recording art, collectibles and in-game assets.
ERC-6551: Asset Ownership Ability to NFTs
ERC-6551, one of the most current standards, brings new functions to NFTs in the blockchain world. With ERC-6551, also referred to as a “Token Bound Account”, an NFT can gain an independent wallet identity on Ethereum and hold other tokens or NFTs on itself. This is especially prominent when it comes to game characters having their own inventories or introducing new solutions in digital identities.
Although the opportunities provided by ERC-6551 are just beginning to emerge, it is stated that it is promising in terms of expanding the use scenarios in the NFT field.
Usage Areas of Token Standards
In the DeFi ecosystem, ERC-20 is used in numerous projects, especially cryptocurrencies and governance tokens. While ERC-721 stands out in NFT markets and collections, ERC-1155 and ERC-6551 standards in gaming applications enable different types of digital assets and equipment to be stored and processed together. In addition, utilizing the potential of ERC-6551 in digital identity applications is on the agenda.
All these standards make it possible for different applications to work on Ethereum with a common language; It serves as an important building block for compliance and security.
