7 Ethereum Token Standards To Make Cross-Platform Compatible Dapps 5 months ago

ERC20, ERC223, ERC777, ERC721

A key reason most blockchain companies use Ethereum to build their dapps is that Ethereum allows them to easily build their native tokens.

These native tokens (usage or security) give dapp owners complete control over their dapp’s ecosystem. They help dapp owners determine how their future users will interact with their dapps.

Also, because tokens built on Ethereum “use a standard coin API,” dapps using them are “automatically compatible with any wallet or exchange platforms also using this standard.” So, dapp owners can ensure their dapps’ compatibility and interoperability on all major wallets and cryptocurrency platforms by using Ethereum tokens.

To make building native tokens easy for dapp developers, Ethereum released a token standard called the ERC20.

In this article, we’ll take a quick look at ERC20. We’ll also understand its main issue and how it resulted in the proposal of a new token standard. We’ll also see several other Ethereum token standard proposals that either propose to improve the ERC20 token standard or introduce functionalities absent from legacy standard.

Here goes.

ERC20

ERC20

ERC20 was developed as a “standard interface” to allow an Ethereum dapp’s tokens “to be re-used by other applications: from wallets to decentralized exchanges.

ERC20 is Ethereum’s official token.

The ERC20 token is also the most widely used Ethereum token standard and makes up for about 90% of the token market.

Dapp tokens built using ERC20 can be easily listed and traded on almost all the cryptocurrency trading platforms.

But it’s not foolproof.

Among its many other issues, ERC20’s buggy transfer handling mechanism has proved to be the most costly. ERC20’s transfer and event handling functions have been exploited a number of times in many hacks and have resulted in the loss or theft of tokens worth millions of dollars.

These monetary losses combined with the constant need of more features (with the Ethereum ecosystem’s exponential growth) have prompted the Ethereum developer community to look for ways to make ERC20 more secure or propose newer standards with newer features. Here are some of the most popular ERC standard proposals.

ERC223

 

ERC223

The ERC223 token — developed by Dexaran — proposes to fix the buggy event handling in Ethereum’s official ERC20 token standard to make it secure and prevent losses of funds.

The ERC223 token aims to kill the most pressing ERC20 issue of processing invalid transactions.

Dexaran explains that with ERC223:

If you send 100 ETH to a contract that is not intended to work with Ether, then it will reject a transaction and nothing bad will happen.

With the ERC20 tokens, however, this Ether will get stuck in the contract.

Bankera — a banking blockchain solution combining an exchange, wallet, debit card, and payment processing solutions — is looking to migrate from ERC20 standard to the ERC223 to bring its users the “benefits of the newer and more secure ERC223 standard…

Not only does the ERC223 standard introduce improved event and transfer handling to keep the users’ money safe, but it’s more cost-optimized as well.

Dexaran claims that the “ERC223 transfer to contract consumes 2 times less gas than ERC20 approve and transferFrom at receiver contract.”

The Ethereum-powered trading platform, Digitex, uses the Ethereum token standard ERC223 over ERC20 mainly because of its cheaper gas costs. But these savings came at a price for Digitex as the founder Adam Todd shares how Digitex had to struggle because of using the ERC223 standard as it made it “harder to get the DGTX token listed early on the decentralized exchanges because they hadn’t upgraded their smart contracts.”

ERC721

ERC721

The ERC721 Ethereum standard token is a special use case token. Unlike tokens built on the ERC20 token standard (which are all the same and exchangeable like a gold brick and powdered gold that weigh the same), ERC721-based tokens are unique (or non-fungible).

ERC721 defines “a minimum interface a smart contract must implement to allow unique tokens to be managed, owned, and traded.

This property that makes ERC721 tokens unique makes the tokens built using the ERC721 standard excellent crypto collectibles. And so it’s popular with dapps that want to build unique collectibles for their users.

ERC721’s trial project CryptoKitties that lets users own and breed unique cats (or digital assets) has raised $12M from top investors.

Also, because ERC721 has a strong use case, you already have many existing/upcoming exchange platforms that support the exchange and trading of non-fungible tokens built on the ERC721 and similar standards. Rare Bits and OpenSea are two trading platforms working exclusively with crypto collectibles (non-fungible tokens).

Here’s a list of dapps using ERC721.

ERC777

ERC777

Just like ERC223, ERC777 also improves upon ERC20’s event handling functions among other improvements.

Further, ERC777 also fixes some issues with the ERC223 standard.

ORCA, an Ethereum-based banking dapp, was considering using the ERC223 standard after the security issues reported in ERC20.

However, ORCA later decided to go with ERC777 instead of ERC223 as ERC777 offered enhanced security that ERC223 offered but also gave new features.

Here’s how ORCA explains its decision to move to the ERC777 standard:

On a technical level, ERC-777 provides a wide selection of choices on how to handle token transactions and various operations. For example, the new standard now clearly defines Mint and Burn functions which are often used by ICOs and various applications when utilizing tokens.”

ERC777’s backward compatibility with the ERC20 standard further prompted ORCA to become one of the early adopters of the standard as this compatibility would mean that ORCA coins would get easily listed on exchanges and platforms already working with the ERC20 standard.

ERC827

ERC827

Just like ERC223, ERC827 is also an extension of the ERC20 standard.

In addition to improving ERC20’s event handling, ERC827 also allows users to share data instead of just value.

ERC827’s author, Augusto Lemble, explains that “the way to improve the current ERC20 standard is with an extension that is fully compatible with the original standard and also add new methods, but keeping it simple at the same time…

Because the developer clearly cared about making ERC 827 compatible with ERC20 (while making it safer and adding the data sharing feature), this standard will likely see good adoption.

ERC884

ERC884

ERC884 is another very innovative proposal for the ERC20 token standard that allows blockchain companies to tokenize shares.

With ERC884, blockchain companies can raise funds via IPO or private equity sale while staying compliant with the Delaware Corporate Law (that now allows using blockchains for maintaining corporate share registries).

This means that these blockchain companies can avoid traditional share registries and a bunch of traditional stock exchanges/agents for their funding needs.

ERC884 author Dave Sag explains how ERC884 allowsfor the creation of tradable ERC-20 tokens where each token represents a numberless (or vanilla) share issued by a Delaware corporation. ERC-884 is designed to represent equity issued by any Delaware corporation, whether private or public.

The developer has also maintained ERC884’s compatibility with ERC20 so that the ERC884-based tokens of a dapp can be easily listed on exchange and trading platforms.

ERC948

Creator Kevin Owocki’s ERC948 token standard proposes to bring the subscription economy to the Ethereum blockchain.

While this Ethereum token standard is still in its very early proposal (rather said the discussion) stage, it could make it big because it targets the huge subscription-based market, which is at the moment un-touched in the Ethereum dapp space.

Right now, if a subscription plan is to be implemented on Ethereum, it would need a user to sign a transaction for authenticating the subscription fee every month. The workaround of holding a user’s money (for X months) in an escrow and charging each month is also not so user-friendly.

ERC498 proposes a subscription opt-in and opt-out experience that could fix this. Although its implementation could prove cost-intensive,  workarounds can always be found as the proposal advances.

Owocki believes that subscription payments on Ethereum “should be architected such that a subscription product can be managed in a completely trustless way. (i.e. no trusted intermediary in between the two parties).

These aren’t all…

In addition to these proposed ERC token standards, you also have ERC621, ERC998, ERC 644 and several others. Dig into this Github repository to discover the latest standard Ethereum token proposals and track their development.

So there you have ‘em — some of the top proposed ERC20 Ethereum token standards.

As with each new “version” of an app, these Ethereum token standards propose to crush bugs, introduce new features, and do things differently in some more optimized or safer ways. However, Ethereum still uses and recommends the ERC20 standard.

Wrapping it up

At Kapitalized, when we consult on ICO projects, especially about choosing a token standard, we always tell our clients that a token standard, is after all, just a piece of code.

Which means it can always have bugs and vulnerabilities.

And so a token standard like ERC20, which has massive adoption, gets its bugs discovered, flagged, and fixed sooner than others.

That said, we also believe that the ERC20 token standard can extended to be made more secure.

In some cases, however, a non-ERC20 token implementation might make more sense.

The good thing is that most of the newer token standards are backward compatible, which means a system designed to work with ERC20 (like a wallet or exchange platform) will likely work nicely with ERC827 as well.

If you’re thinking about migrating to a different token standard or need help with determining the best token implementation, reach out via this form.


Also published on Medium.