The massive growth of cryptocurrencies has caught the attention of many entrepreneurs and influenced them to be a part of the cryptocurrency ecosystem.
When planning to start a crypto project, what is the first thing to decide? Tokens/coins are a fundamental aspect of any crypto project. You can develop your blockchain based application and create tokens on it. Another option is to use existing blockchain technology to create tokens. Blockchains such as Ethereum and Binance Smart Chain have their own set of rules and regulations collectively known as the standards for creating tokens on the blockchain. Let’s take a closer look at the Ethereum token development and its benefits, and let us discuss in detail the ERC20 and ERC721 tokens and their key differences.
Steps to consider in Ethereum Token Development:
Before creating an Ethereum-based token, there are a few key steps to developing the token. Here are the steps:
- First, select the type of Ethereum token and create and complete the functions within it. Key aspects such as total token supply, decimal value, token name, etc. must be completed. The next steps are roadmaps and white papers.
- There are many Ethereum token standards. Choose a standard based on the token you want to create. ERC20 is a fungible token that can be exchanged with other tokens, and ERC721 is a non-fungible token.
- Develop a smart contract and test it to ensure it works according to your needs.
- After successfully executing the smart contract, validate it with Etherscan to prevent duplicate tokens.
- After checking, run the code multiple times to avoid errors and bugs. After testing is complete, the final step is to deploy the code to the Ethereum blockchain.
Advantages of Ethereum token development:
- Ethereum tokens allow verifications of transactions quick and easy.
- ERC tokens can be easily traded on all platforms.
- It is widely used in crowdfunding, such as ICO and IDO, and is a medium for raising funds quickly.
- Ethereum tokens are highly secure, and there is no risk of fraud.
- Ethereum tokens are highly liquid and can be quickly redeemed for cash.
- ERC tokens are the easiest tokens to develop.
- Ethereum token functionality is highly valuable and benefits users.
Let us first understand the ERC20 and ERC721 token standards to understand their differences better.
As smart contracts became more popular in 2015, it became difficult to record how tokens were encoded using Ethereum smart contracts. Because anyone could make a smart contract, there was no way to govern or account for the smart contracts being made. Ethereum’s early smart contract tokens did not contain a similar set of information in the same format. As a result, the token ecosystem has become very difficult to interact with. As a result, Fabian Vogelsterer brought a concept called ERC20 tokens that appeared in 2015. ERC20 is a token standard for creating smart contract-enabled fungible tokens on the Ethereum blockchain. Anyways in 2017, the use of ERC20 token standards was officially recognized.
Components of ERC20 Tokens:
ERC-20 token includes components such as Token Name, Symbol, Decimal Number, Total Supply, Balance Of, Transfer, Transfer From, Allowance, and Grant. An ERC20 wallet is required to manage the ERC20-compliant tokens.
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Goals Of ERC20 Token Development:
The ERC-20 token development supported implementing standard application programming interfaces for tokens in smart contracts. As such, ERC20 will serve as the standard protocol for the Ethereum blockchain, allowing users to share, exchange, or transfer tokens. Standardizing on ERC-20 gave programmers a productive way to achieve token designs that adhered to a particular set of rules. Therefore, the ERC-20 token standard is easier to use across the Ethereum blockchain. An ERC 20 token represents rights, services, assets, ownership, etc. All ERC20 tokens look alike and have the same functionality.
ERC721 is a token standard for creating non-fungible tokens on the Ethereum blockchain. ERC-721 tokens are also known as NFTs. In 2018, Nastassia Sachs, William Entriken, Jacob Evans, and Dieter Shirley proposed Ethereum Improvement Proposal (EIP721) 2017 to handle all the shortcomings in the ERC20 token standards. Later in 2018, Ethereum accepted ERC721. ERC-721 token standard helps developers tokenize ownership of any data. As a result, the ERC721 token standard has fundamentally changed the traditional perception of how assets are represented on the blockchain.
Components of an ERC721 Tokens:
ERC-721 token includes various components such as Functions name, Symbol, Total Supply, Balance Of, Owner Of, Approve, Transfer, Take Ownership, Token Metadata, and Token Of Owner By Index. The ERC721 token standard came to the limelight after the increasing popularity of NFTs.
Goals Of ERC721 Tokens:
The main goal of ERC721 token development is to create non-fungible tokens on the Ethereum blockchain. As the name says, all the tokens are unique and are of different values based on their uniqueness and rarity. ERC-721 token standards also follow specific standards, just like ERC-20 tokens. The ERC-721 token criteria highlight key aspects for determining ownership and token creation approaches. The standard also provides procedures for token destruction and transfer. NFTs created using the ERC721 standard can be traded on any NFT marketplace built on the Ethereum blockchain.
Differences between ERC20 and ERC721:
|ERC20 Tokens||ERC721 Tokens|
|ERC20 tokens are fungible in nature||ERC721 are non-fungible in nature|
|ERC20 are interchangeable and represent a single entity ||ERC721 are non-interchangeable and represent a collection of assets|
|ERC20 tokens can be divided in any number of ways. ||ERC721 tokens are not divisible.|
|ERC20 tokens value remains the same||ERC721 token's value fluctuates based on their uniqueness|
|There is no specific owner for an ERC20 token.||Since ERC721 tokens are unique, they have specific owners. |
|ERC20 tokens are not collectible as they all are the same. ||ERC721 tokens can be collected because each token is unique|
|Commonly owned by many crypto enthusiasts. ||They are not commonly adopted as they cost too much. |
|ERC 20 tokens can be easily exchanged for one another. ||ERC721 cannot be exchanged for one another if they are different.|
Related Read: BEP 20 Vs ERC 20. Which is Best?
Tokens remain theq-t major fundamental of any crypto or an NFT project. Most crypto projects use the most popular standards, ERC 721 and ERC 20 token development. Whether fungible, non-fungible, or semi-fungible, TurnkeyTown helps develop a highly scalable and secure Ethereum token suitable to your business needs. Get in touch with us today to build tokens on the Ethereum blockchain.