From ERC-20 to CIS-2: Navigating the World of Token Standards
Exploring the world of cryptocurrency tokens unveils a landscape defined by standards and protocols governing their creation and functionality within blockchain networks. From facilitating transactions to powering decentralised applications (dApps), these tokens play a pivotal role in the crypto ecosystem.
In this comprehensive guide, we delve into the realm of token standards, examining their significance, operation, and diverse examples across different blockchain platforms.
What Are Token Standards?
Token standards consist of specific regulations and protocols governing the creation, behaviour, and functionality of a cryptocurrency token within a blockchain network. Cryptocurrency tokens serve as digital assets that are capable of being generated, transferred, and stored on a blockchain. They facilitate various on-chain operations, including payment of transaction fees, network security through staking, operation of liquidity pools, and participation in governance voting.
The emergence of different token standards ensures that tokens adhere to the respective blockchain protocols and can interact seamlessly across applications. These standards promote compatibility among tokens, enabling smooth integration across diverse blockchain protocols. Consequently, decentralised applications (dApps) utilising tokens for operation benefit from enhanced liquidity and interoperability.
How Do Token Standards Operate?
Token standards establish the criteria under which smart contracts must function to execute fundamental tasks on a blockchain protocol. This uniformity allows developers to create their cryptocurrency tokens, as the interfaces and functionalities are standardised. Developers can construct smart contracts for tokens that interact with each other, as this standardisation ensures consistency in data types, functions, and behaviours.
Token standards are established through proposals submitted by blockchain developers and the community. For instance, the Ethereum blockchain, which introduced smart contracts and remains a leading platform for numerous applications, employs Ethereum Improvement Proposals (EIPs) to establish standards for the core protocol, application programming interfaces (APIs) for nodes and client software, and smart contracts running on the Ethereum Virtual Machine (EVM). Ethereum Requests for Comment (ERC) are proposals defining standards for Ethereum-based applications, encompassing smart contract and token standards. They serve as technical documents outlining guidelines for smart contract development.
Examples of Common Crypto Token Standards
The Ethereum blockchain stands out as the top pick for numerous dApp developers seeking to deploy smart contracts. Among the most utilised standards for tokens operating on Ethereum are ERC-20, ERC-721, ERC-777, and ERC-1155. Additionally, other commonly used blockchains like BNB Chain and Solana have their token standards.
- ERC-20 serves as the Ethereum standard for fungible tokens, encompassing various cryptocurrency types like utility tokens, security tokens, and stablecoins. It is extensively utilised by projects developing utility and governance tokens for dApps operating on the Ethereum blockchain or its sidechains. Being the most widely adopted Ethereum token standard, ERC-20 outlines six mandatory functions and three optional functions that a token must adhere to for compliance. Examples of ERC-20 tokens include Uniswap (UNI), Shiba Inu (SHIB), Sandbox (SAND), and Polygon (MATIC).
- ERC-721, the Ethereum non-fungible token (NFT) standard, represents unique assets like digital art, collectables, and gaming items. Unlike fungible tokens, NFTs have distinct identifiers and cannot be interchanged. This standard, more intricate than others, offers optional extensions and a framework for creating, owning, and transferring tokens with unique specifications.
- ERC-777 expands on the ERC-20 standard, aiming to overcome its constraints. It introduces ‘Hooks’, combining token transfer and contract notification into one message, enhancing efficiency in token transactions for smart contracts. This standard enables more intricate token trading interactions and introduces the capability to decline transactions from blacklisted addresses.
- ERC-1155 advances previous standards by creating tokens that can be fungible or non-fungible and optimising gas efficiency for blockchain transactions. It merges aspects of ERC-20 and ERC-721 standards, offering versatility. Developed by Enjin for the NFT ecosystem, ERC-1155 enables a single smart contract to manage multiple token types, addressing ERC-721’s limitations, particularly its lack of batch transfer support.
- BEP-20 stands as the standard delineating technical specifications for tokens utilised on the BNB Chain, which underpins the Binance cryptocurrency exchange. Derived from ERC-20, BEP-20 is tailored to the Binance ecosystem. BEP-20 tokens seamlessly interact with dApps and decentralised exchanges (DEX) on the BNB blockchain.
- TRC-20 is the token standard for creating fungible tokens on the TRON blockchain, akin to ERC-20. It includes six mandatory and three optional functions for token operations. TRON offers high transaction throughput and low fees. TRC-20 tokens ensure versatile functionality and quick payments through smart contracts. They’re compatible with ERC-20, allowing for reliable extensions.
- Solana Programmable Token (SPL) serves as the token standard for the Solana blockchain, tailored for high-speed transaction processing essential for decentralised finance (DeFi) applications and scalable uses. Stored in the Solana Program Library, SPL token standards provide a standardised interface for token creation, utilisation, and removal, compatible with the Solana blockchain.
What Is Concordium Token Standard?
CIS-2 or Concordium Token Standard 2, introduced on May 16, 2021, establishes a comprehensive framework for token management on the Concordium blockchain. Each CIS-2 token type is identified by a unique token address, comprising a contract address combined with a CIS-2 Token ID. This address is globally unique and serves as a definitive identifier within the Concordium ecosystem. The token address is represented textually through byte encoding, utilising unsigned LEB128 to encode the index and subindex of the contract address, followed by the token ID bytes. This encoded byte string is further processed using Base58Check, incorporating version byte 2 and the Bitcoin symbol chart for enhanced security and compatibility across the Concordium network.
In the Concordium Token Standard 2 (CIS-2), decisions are made to optimise efficiency and simplicity. So let’s outline key divergences and rationale behind the Concordium Token Standard 2 (CIS-2) in comparison to prevalent token standards on other blockchains.
- Token IDs are represented as bytes rather than integers, reducing energy costs.
- Variable-length encoding is used for token amounts, saving gas.
- Only batched transfers are supported to minimise energy consumption.
- No explicit authorization scheme is mandated to keep the specification straightforward.
- Token-level approval/allowance mechanisms are omitted for simplicity and efficiency.
- Tokens receive hook functions and SHA256 checksums ensure transaction integrity.
- These decisions prioritise energy efficiency and simplicity, enhancing the user experience and reducing costs in token transactions on the Concordium blockchain.
Conclusion
In conclusion, token standards serve as the backbone of the crypto economy, providing a structured framework for the creation, management, and interoperability of digital assets within blockchain networks. As the crypto landscape continues to evolve, adherence to these standards becomes increasingly crucial for ensuring seamless integration, enhancing liquidity, and fostering innovation across decentralised ecosystems.
About Concorpad
Concorpad stands at the forefront as an innovative launchpad platform operating on the robust Concordium blockchain, poised to revolutionise the IDO landscape for inventive ventures. Our core mission is firmly rooted in bridging the divide between visionary concepts and the market, providing an all-encompassing framework from initiating token launch to its seamless listing. At Concorpad, our unwavering dedication revolves around cultivating growth and propelling innovation within the expansive realm of the blockchain ecosystem.
