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Tokens on Ethereum

Lesson 4 of 8
By the end of this lesson you’ll be able to tell the three main token standards apart, say exactly what you hand over when you approve a contract or sign a permit, and check that a token is the one it claims to be before you touch it.
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What a token is

Ether is built into Ethereum. Every other asset on it is a token, and a token is a contract that keeps a list of who holds how many. When you “send” a token, nothing moves: the contract subtracts from your line and adds to theirs.

When a project “mints” tokens, it adds lines. Crypto from Zero made that point at Beginner level; this lesson is about the standards that make it work.

Standards exist so one wallet and one exchange can handle thousands of tokens. ethereum.org: “These standards help ensure smart contracts remain composable,” so a new token “stays compatible with existing decentralized exchanges and applications.”

What it’s for
ERC-20
Interchangeable tokens: stablecoins, governance tokens, most things that trade
ERC-721
One-of-a-kind tokens, where each has its own ID
ERC-1155
Many token types in one contract, some interchangeable and some not, with batch transfers
In ethereum.org’s words
ERC-20
“A standard interface for fungible (interchangeable) tokens”
ERC-721
“a Non-Fungible Token Standard that implements an API for tokens within Smart Contracts”
ERC-1155
“A standard interface for contracts that manage multiple token types”

ERC-1155 suits games, where one contract might hold a currency, a thousand identical potions and one unique sword, and ethereum.org notes it “allows for more efficient trades and bundling of transactions.”

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