Beginner’s Guide to Token Standards – Ethereum, NEO and Tron
For any person, entity, project, or organization looking to explore Blockchain’s uses and eventually issuing a token on them, they must investigate several methods by which the tokens can be issued. Be it an ICO, a collectible, a utility token, or security. The creators have to be aware of the best protocol out there for attaining maximum utility.
Token Standards are a set of guidelines proposed by Blockchain Protocols that allow the generation of Tokens. A Token Standard must be kept in mind while initiating a token system, based on the project’s utility. Each token standard mentioned below is suitable for a particular use case, ranging from the creation of Smart Contracts to establishing security for an organization or project.
As more and more token standards emerge, each one will roll out new features and bug fixes for the existing tokens. Choosing which digital token to use in your blockchain project is essential to ensure your platform delivers the most value to end-users. Whether you’re launching an ICO/IEO/STO or tokenizing medical records, getting the “tokenomics” right is a vital step to launch a successful product.
For our readers’ reference, we have taken up the task of formulating a list of the most proficient token standards put forward by Ethereum, Tron, and NEO communities. Each standard has been simplified for the greatest perception of our readers.
Let us look into some of the best Token Standards available in the Blockchain Sector:
Ethereum – The ERC Standard
Ethereum is basically a Smart Contract platform. It allows its users to leverage its native Blockchain’s capabilities to develop projects of their own. To issue Ethereum based tokens, Ethereum has released several Token Standards or Guidelines that can be used to issue tokens based on the use case. Token Standards on the Ethereum Blockchain are termed as ERC or Ethereum Request for Comments.
Briefly, ERCs are technical documents used by smart contract developers. They contain a set of rules required to implement tokens for the Ethereum ecosystem. These documents are usually created by developers and include information about protocol specifications and contract descriptions.
Before becoming a standard, an ERC must be revised, commented on, and accepted by the community through an EIP (Ethereum Improvement Proposal). One should note that the community does not accept most proposals. Only peer review Proposals are, in the end, converted into standards.
There are several dozen standards proposed on the Ethereum Network. Some of them being
- ECR – 20
- ERC – 223
- ERC – 1400
- WRC – 1404
- ERC – 777
- ERC – 721
- ERC – 1155
- ERC – 671 and so on.
Below, we’ve listed the most common token standards in use today.
ERC – 20
Among the most common and functional ERC token types is the ERC-20. ERC – 20 is more commonly known as the ICO token. More than 80% of the ICOs launched post-2017 have been on the ERC – 20 standard.
ERC – 20 has known to be widely used because of its simplicity. Simple functions within the standard allow developers to limit the total supply, customize use, implement generation process, etc. These functions form a key consideration in the tokenomics model of any project. The Standard also allows users to transfer tokens easily.
Some of the major projects developed on ERC – 20 are
ERC – 721
ERC-721 is the seven hundred and twenty-first proposal in the Ethereum proposal process (EIPs) to standardize how applications can be developed and customized. Unlike the ERC-20, ERC-721 tokens are non-fungible and allow greater flexibility. In simple words, each token has a different value in the system. ERC-721 is a free, open standard that describes how to build non-fungible or unique tokens. While most tokens are fungible (every token is the same as every other token), ERC-721 tokens are all unique. It is trickier in the ERC – 721 standard to get UI/UX right, as it allows for greater customization.
“ERC-721 defines a minimum interface a smart contract must implement to allow unique tokens to be managed, owned, and traded. It does not mandate a standard for token metadata or restrict adding supplemental functions.”
The applications or use-cases of the standard are diverse. Any project that might need uniqueness or diversity among its tokens can opt for the standard. Think of them like rare, one-of-a-kind collectibles. One of the most famous examples of an ERC – 721 based project is the famous CryptoKitties Dapp. It distributes collectible kittens on the blockchain.
ERC – 777
Considered as an alternative for ERC – 20, and just as the ERC – 227 offers bug fixes for the ERC-20 token standard, the ERC – 777 digital token proposes more ways to improve blockchain usability. This digital token adds several more functions to the popular ERC – 20 token standard. One of the most innovative options is mint or burn tokens, which may be a necessary feature, depending on a project’s tokenomics model.
ERC – 1404
ERC – 1404 is a standard developed by the company, Tokensoft. ERC-1404 adds one simple function to ERC-20 tokens with a few lines of code. With ERC-1404, the token issuer can restrict those tokens’ transfer, depending on the project’s needs and jurisdiction regulation.
The Tron Ecosystem
Like Ethereum, the Tron Network also boasts a couple of guidelines for Tokens and Smart Contracts’ issuance. Although not as diverse, the Tron network shows a formidable competitor for the Ethereum Network.
In the TRON network, every account is capable of issuing tokens at the expense of 1024 TRX. Users can lock their tokens separately. To issue tokens, the issuer needs to specify a token name, total capitalization, the exchange rate to TRX, circulation duration, description, website, maximum bandwidth points consumption per account, total bandwidth points consumption, and token freeze. TRC – 10 and TRC – 20 are the only fully functional standards available on the Tron Network.
While there are not many tokens built on Tron that have been acclaimed, it poses a ready alternative for future projects.
TRC – 10
The easiness of issuing a TRC10 token makes TRC10 a great way for teams to gauge interest in their project without spending a lot of money on development.
One does not need any coding experience to implement and use the TRC – 10 standard. It is very user friendly, boasts simplicity but is limited in its functionality. The transaction fee of the TRC – 10 tokens are almost 1000 times lower than the tokens on the TRC – 20.
TRC10 is already used in high profile projects like BitTorrent Token (BTT), allowing faster downloads on BitTorrent. The BitTorrent network runs on the TRC – 10 standards as it allows greater speed and fast transaction time. This is best suited for BitTorrent, as the project boasts a total of 100 million members on its network.
TRC – 20
While TRC – 10 is a simple token standard on the Tron Network, the TRC – 20 is a smart contract standard. It allows for much greater customization and complexity. TRC20 gives Tron-based tokens more functionality, as TRC20 tokens are used in smart contracts. TRC20 token standard makes it convenient for everyone to make conditional & instant transactions. In fact, deploying a TRC20 token is not very easy. It demands the knowledge of developing smart contracts, which are again more complicated with the currently available tools.
For example, a Tron-based project might automatically issue more of its TRC20 tokens to early purchasers by programming such an early purchase bonus into the token’s smart contract. TRC – 20 also allows the functioning of a Virtual Machine (VM). A VM is a machine that leverages the computation of a distributed database network, such as that of Tron, to do computation.
NEO and it is Standard
Dubbed as the Chinese Ethereum, NEO is a development platform that facilitates other networks’ deployment through its own platform. Like Ethereum, the NEO blockchain allows for the creation of smart contracts and customizable applications.
What makes NEP Tokens fundamentally valuable or special is the fact that they contribute to the NEO ecosystem. The idea is that the more NEP tokens running on the platform, the stronger the NEO ecosystem grows. The stronger NEO and the NEO community get more potential for growth in both price and innovation.
NEP stands for the “NEO Enhancement Protocol.” The number “5” is simply a revision that everyone has agreed upon. It is also the version through which the enhancements are added to the platform. This revision also added NEO-powered cryptocurrency tokens, similar to what Ethereum was doing until now. NEP-5 tokens are to NEO what ERC20 Tokens are to Ethereum: Tokens created on their respective networks to conform to their specific standards.
NEP-5 is the standard for tokens to run on the NEO blockchain. For now, all tokens on the NEO network are built to the NEP-5 standard, allowing potential projects to be able to use the NEO blockchain to grow their ecosystem. NEP5 manages the standard of NEO tokens. It is a protocol that governs how the NEO token is developed, shared, and behaves in the NEO network. If a developer wants to circulate his own token, then he has to meet the NEP-5 standard.
NEP’s biggest disadvantage is that it takes greater resources to deploy a NEP-5 token, while similar standards such as ERC-20 or TRC – 10 do not cost as much.
Ontology is probably the most well-known project built on NEP-5. The Ontology project promises businesses of all sizes the possibility of deploying their own blockchain solutions without extensive knowledge of how blockchain works. The project will provide complete support for public blockchains and updated smart contracts.
Together with NEO, the project aims to also connect these blockchain platforms with similar and complementary platforms in the future to create an ecosystem that works alongside NEO.
With hundreds of new projects coming up daily, it is obvious that they will be looking at already existing protocols to help with their propagation. Knowing various Standards across various Blockchains will help the project developers formulate plans and issuance schemes while ultimately enabling them to choose the Standard that is best suitable for their needs.
While most projects today usually favor Ethereum, as there has been higher development than the others, there is much room for Tron, NEO, and others to grow. As more traction flows in, the need to develop and diversify guidelines will grow. Having a fully functional ecosystem that is simple yet flexible will take any blockchain to much greater heights.