What Are Token Standards? Explained
TLDR;
Most cryptocurrencies use the same set of rules, called "token standards," that describe important features of tokens. Token standards are important because they tell developers how to design, build, and use tokens on a specific protocol. As users, we don’t think too much about token standards, but we have seen some of those terms such as ERC 20, ERC 721 or BEP 20. This blog will explain the importance of standards for making crypto tokens more accessible and valuable.
What are token standards?
A token standard is a template for making tokens that lists the features and functions that they all have in common. This includes the rules for smart contracts to operate on a blockchain. Each blockchain has a different way of creating and giving out tokens, and there are open-source templates for developers to use to create the according tokens.
Why do we need token standards?
The token standard sets rules for what information a token must have, what it can do, and what actions token holders can take. Token standards provide guidance for creating, issuing, transferring, and destroying tokens on a blockchain.
Token standards make sure that smart contracts can be composable, so that a token for a new project can be used everywhere in the same blockchain environment. By standardizing how different tokens work, developers can build apps on top of those standards, knowing that the interfaces will stay the same as long as the standard is used.
Read Also: What Are Liquid Staking Tokens?
What are some popular token standards?
ICS 20: This is the standard used by all IBC tokens in the Cosmos ecosystem.
ERC 20: This is the most common token standard for fungible tokens on Ethereum.
ERC 721: This is the common standard for non-fungible tokens (NFTs), like a bored ape yacht NFT.
ERC 777: This standard allows people to add extra features on top of a token, such as mixer contracts and an emergency recovery function if you lose your private keys.
BEP 20: This is a token standard for the BNB smart chain (BSC).
Know More: IBC Standards
Conclusion:
Token standards are required to ensure the efficient operation of smart contracts that are running on blockchain.Smart contracts use these standards as a programming interface to build decentralized applications. If you're new to the world of cryptocurrency, you can subscribe to our newsletter and find out more about the Umee ecosystem by clicking here.