Are you an entrepreneur planning to issue Ethereum-based tokens? You might be looking around to find what ERC standards mean and how they important to you. This beginner’s guide should help to understand What is Ethereum token & how they are different than Ethereum?
Before that just clarify yourself What is Cryptocurrency Coin & Token?
Here we explained in simple words – Coins vs Tokens!
"Coins are stand-alone cryptocurrencies based on their own blockchain. Tokens are built and hosted on existing or another blockchains"
Coin basically refers to cryptocurrency that has it own blockchain and works separately of another platform at the same time token refers to cryptocurrency that operates and based its existence on another platform for example Ethereum.
Hope you will get some major difference between about coins & Tokens!
Let's come to our topic here - What are Ethereum-based Tokens & Standard Types?
Here you may know the basic concepts of Ethereum and how Ethereum works?
Ethereum can actually make it simpler to cryptocurrencies in general. Yes, Ethereum is a decentralized platform upon which smart contracts can be programmed and executed. It is the first base that supports millions of decentralized applications (dApps).
Whenever a new application for blockchain technology and smart contracts is developed on top of Ethereum, a new Ethereum- based token can be created. The clarity aspect of this process is that Ethereum has set standards for tokenization. Various types of decentralized applications will be tokenized according to different standards, build upon on what the application is meant to do.
As a result of these standards, it is much more forthright for smart contracts and tokens to interact and, therefore, for developers to create dApps on Ethereum.
What are ERC standards?
An Ethereum Request for Comments (ERC) - It is a standard document that smart contract programmers using the Ethereum blockchain platform to write. They explain the rules in these documents that Ethereum-based tokens must obey with.
The Ethereum platform uses a process called the ‘Ethereum Improvement Proposal’ to review these documents. They comment on it and as a result of that, the Ethereum token developer that built the document may review it.
The Ethereum platform accepts some of these documents after working through the 'Ethereum Improvement Proposal' process, finalizes it, and then Ethereum developers implement it.
The most common standard for Ethereum tokens is currently the ERC-20 standard, but there are also ERC-223, ERC-721, and ERC-777 standards. Here, we will explain each standard and how it is being used in the decentralized platform.