The Ethereum network is constantly evolving, all thanks to ERC standards.
Ethereum is the second biggest cryptocurrency, both in token price and market capitalization, on the market today. It is widely used because, unlike Bitcoin, Ethereum is a network that has massive utility. NFTs and the entire space of decentralized finance (DeFi) were ushered in by Ethereum.
One of the aspects of Ethereum that have led to its growth is the Ethereum Request for Comment (ERC) Standards. ERC standards are documents created by smart contract developers with rules that Ethereum-based tokens must comply with. These are reviewed by members of the Ethereum community and revised, and then changes are implemented to improve the workings of the Ethereum ecosystem. If you are a crypto developer or aspire to be one in the future, here is a quick overview of some of the most popular ERC standards and the changes they have brought about in the Ethereum blockchain.
ERC-20
One of the most popular token standards is ERC-20. ERC-20 tokens are similar to other cryptocurrencies, like Bitcoin, in that they are blockchain-based assets that can be exchanged. The main difference is, instead of having their individual blockchains, all ERC-20 tokens operate on the Ethereum network. To put it simply, ERC-20 allows developers to create their own cryptocurrencies on the Ethereum network instead of making everything from scratch. ERC-20 tokens are fungible (they can be exchanged for one another) and transferable and have a fixed supply. Some big cryptocurrencies were built using ERC-20. These include Tether, USD Coin, Binance Coin and DAI. This token standard has been crucial to allowing interoperability of all tokens made using the ERC-20 standard as well as all ERC-20 compatible services, like MyEtherWallet and MetaMask.
ERC-223
This token standard is meant to solve a major problem with ERC-20 tokens. When users accidentally send ERC-20 tokens to an incompatible address or a smart contract that does not explicitly support token reception, their tokens are burned and lost forever. This issue once led to the loss of US$3 million worth of ERC-20 tokens. To solve this problem, ERC-223 introduces a function called tokenFallback. This makes it possible for ERC-223 smart contracts to recognize transactions and reject them in case the contract is incompatible with transactions, preventing the loss of tokens.
ERC-884
In 2017, the state of Delaware in the U.S. allowed companies within the state to use blockchain to maintain corporate share registries. ERC-884 uses this judgment and facilitates the creation of tradable ERC-20 tokens, with each representing a share issued by a corporation in Delaware. ERC-844 eases the process of raising money for Delaware corporations, which can now conduct equity sales or go public without the involvement of the traditional stock exchange. Implementation of ERC-884 requires an off-chain private database to comply with the know-your-customer (KYC) requirements in the state of Delaware.
ERC-1337
ERC-1337 is a proposed standard meant to facilitate blockchain-based recurring subscription models. Monthly subscriptions for software or content are relatively common today, and ERC-1337 intends to make it possible for you to make recurring payments using cryptocurrencies as well. ERC-1337 allows merchants to store the customer’s signature to retrieve recurring payments that have been pre-approved according to a set schedule (for instance, 12 pre-approved payments for a yearly subscription). Besides enabling the practical application of cryptocurrency, ERC-1337 would also allow crypto enthusiasts to provide recurring contributions to blockchain-based projects, furthering the growth of the industry.
ERC-721
If you love Bored Apes or Cryptopunks, you are already familiar with ERC-721. ERC-721 is the token standard for non-fungible tokens (NFTs). Unlike the ERC-20 tokens, each ERC-721 token is unique and makes it possible to tokenize assets, anything from property to concert tickets. The ERC-721 is the backbone of the US$41 billion NFT economy. The ERC-721 tokens and their underlying smart contracts make it possible to trace historical ownership and verify the authenticity of the NFT or any underlying asset (like a document or a ticket) that it represents.
ERC standards help accelerate the adoption of blockchain technology. Each of the standards we mentioned above and the many that continue to be drafted daily will solve issues and add more usability to the tokens within the Ethereum network. As more of these standards continue to be created and approved, the Ethereum network will grow and this, in turn, will lead to the growth of the crypto ecosystem.
Header image courtesy of Pixabay
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