ERC-20, ERC-223, ERC-721 tokens - how do these standards differ?

What is the ERC20 protocol

ERC20 is the token standard of the Ethereum network. The abbreviation stands for Ethereum Request for Comments - a request for comments on Ethereum. This is the company's official protocol for making proposals to improve the blockchain on the network. Number 20 is the offer identifier.

Ethereum is a platform on which decentralized online services based on the blockchain are created. Developers use it to write applications.

The ERC20 protocol is referred to as a token, or what is the basis of most modern tokens. The term token has several meanings:

• private banknote issued due to lack of funds;
• a device that provides information security, a hardware key for identification.

Who invented ERC721?

The original ERC721 specification was proposed by Dieter Shirley as an Ethereum Improvement Proposal (EIP), which is basically the process of introducing new standards to Ethereum.

Anyone can submit an EIP, but it goes through a process of review and iteration before it is accepted by the community. Once accepted, EIP becomes "Ethereum Request for Comments" (ERC), which is a standard for Ethereum applications.

The official authors of the ERC721 standard are William Entriken, Dieter Shirley, Jacob Evans and Nastassja Sachs.

Please note that each is compliant with the ERC721 standard, and the cat collecting game used the ERC721 beta before the standard was finalized. The most expensive CryptoKitty was purchased in September 2020 for 600 ETH or about $170,000 at that time at the ETH exchange rate.

Short story

• September 2020 - Dieter Shirley presents EIP 721.
• December 2020 - CryptoKitties is so popular that it overloads the Ethereum network, significantly slowing it down.
• June 2020 - ERC721 is accepted as "final", meaning that there is agreement among Ethereum developers to accept it as a standard.

Reasons for creating ERC20

The protocol was created in 2020 by the founder of the Ethereum platform, Vitaly Buterin. Initial purpose of creation:

• replace securities in the digital world;
• make electronic money universal;
• conduct an ICO - raising funds for the development of the company.

Before the advent of the standard, platforms operated according to their own rules; each token had an individual type of smart contract.

The one-size-fits-all ERC20 protocol was created to solve interoperability and support issues.

The protocol contains a set of rules by which all coins created on the basis of this platform operate. Let's list the problems that the new standard solved:

• to create a new token it was necessary to write new code;
• it was impossible to quickly place tokens on services, wallets and exchanges. Due to the lack of compatibility, placement required a lengthy approval process with support.

After the advent of the ERC20 standard, the ICO market began to expand rapidly, since developers no longer had to create compatibility standards for tokens with an exchanger, blockchain, wallet and DApps each time.

DApps are decentralized open source applications. They belong to no one and cannot be closed. The software platform is implemented on decentralized blockchains and is populated using tokens generated by the algorithm.

Storing ERC-20 tokens

To store funds, the user only needs to have a standard erc 20 wallet for working with Ethereum. Given a single blockchain, the wallet will be universal, supporting the storage of various coins created on a common standard. Accordingly, all completed transactions will be reflected in Etherscan.

Despite the many wallets available for working with Ethereum, MyEtherWallet is worth recommending. This wallet works with any tokens based on the ERC-20 standard. Other wallets are not able to offer such variety. Money will be credited to them, but you won’t be able to see them or do any manipulations.

It must be recognized that the emergence of the ERC-20 was an important step towards improving cryptocurrencies, while introducing diversity and versatility into the digital currency world.
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ERC20 standard functions

The ERC20 standard includes 6 mandatory functions and 3 additional ones. The developers do not oblige, but recommend using additional functions when creating a token. The list of required features includes:

3 additional features recommended for use:

• name — token name;
• decimal — number of decimal places;
• symbol — symbol for exchanges.

These features created a single code base that allowed wallet developers and exchanges to collaborate with all ERC20 protocol contracts. Unification of functions simplified the development of tokens.

MediBloc [ERC20]: cryptocurrency to ruble rates

Current cryptocurrency rates to etherparty – follow fluctuations online. Information comes from the largest exchanges and is processed in real time. You can see exchange rate changes for most of the most popular fiat currencies. Online charts, automatic converter and news will allow you to quickly navigate the current market trends in the relationship between etherparty and cryptocurrencies.

It is always worth remembering that the cryptocurrency exchange rate is quite volatile. It can either grow by several percent in a couple of minutes or fall. This volatility attracts most investors, who constantly monitor the price of cryptocurrency in order to buy at the lowest price, and then wait for growth to sell at the highest. You can buy cryptocurrency quickly and at a favorable rate in the Matbi online exchanger. The service has been operating for more than five years and can offer users not only the exchange of cryptocurrencies, but also their reliable storage. Matbi's built-in crypto wallet supports four leading cryptocurrencies: Bitcoin, Litecoin, Dash and Zcash. A high level of protection for users’ crypto assets is provided by “cold” wallets, as well as three-factor authentication when entering your personal account (PIN code, email code and SMS code, which can be replaced with Google Authenticator). The service is also interesting to users, as it includes a multi-level affiliate program. 24-hour technical support promptly answers all user questions. How to become the owner of cryptocurrency in Matbi is discussed in detail in this video.

Estimate!

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How to create your own token using the ERC20 standard

The most popular and easiest way is to open the ERC20 source code written in the Solidity programming language and change a few lines. Then upload the contract to the network using official clients, for example, MetaMask.

Smart contracts

These are programs that run automatically and allow you to create decentralized worlds, cryptocurrency exchanges and your own tokens.

Before the advent of the standard, platforms operated according to their own rules; each token had an individual type of smart contract.

Smart contracts are stored on the blockchain. They allow you to exchange shares, money and other types of property directly, eliminating intermediaries and optimizing the process. Contain a contract that specifies the terms of the transaction.

Requirements fulfilled by smart contracts:

• wallet balance control;
• verification of transferred funds;
• sending tokens.

Smart contracts are described mathematically and eliminate double interpretation. If one of the parties has not fulfilled the terms of the contract, this will lead to fines without transferring the problem into the legal field.

In which programming languages ​​can you create your own tokens?

For this purpose, 4 programming languages ​​can be used:

• Mutan - Go-like language;
• LLL - Lisp-like;
• Serpent - Python-like;
• Solidity is similar to JavaScript and aims to develop smart contracts.

The Solidity language was based on an idea by Gavin Wood. This idea was implemented in 2014 by developers led by Christian Reitwiesner. The Solidity language is cross-platform, but in practice, it is written primarily for Ethereum.

How are ERC721 tokens produced?

A token is simply a smart contract or piece of code in Ethereum. An ERC721 token is created by writing a piece of code in a programming language such as Solidity that follows the same basic pattern or base code.

After using the basic template, you can choose unique details about the token you are creating, such as owner, token name, symbols, etc.

You can even program additional features into your NFT, but the real value is in how the NFT interacts with other smart contracts.

How tokens differ from cryptocurrencies

Cryptocurrency, as opposed to a token:

• used as a monetary unit to measure the value of a product and is characterized by purchasing power;
• can be earned by mining;
• is issued not by just one person, but by all miners;
• does not provide bonuses or discounts.
• is based on blockchain and has a wallet based on this technology.

Tokens are an analogue of shares that are issued not on the stock market, but on the Internet using ICO.

Token, as opposed to cryptocurrency:

• issued by the ICO initiator and can be either a discount or a bonus for the product;
• is a status marker showing the availability of funds, reflecting merit and giving the right to use a service or product;
• tied to the Ethereum network, works within the framework of the format adopted within it, allows you to track transactions.

Simple examples. A person’s passport is a token, as it provides the rights of a citizen, just like a token that gives the right to travel on the subway. Tokens can be exchanged for money if they become in demand. The price will increase if, due to the congestion of the lines of tokens, no more than two tokens are allocated per month. Then the tokens can appear on the exchange, where they will be traded. When entering the exchange, the tokens will not become a cryptocurrency, just as the tokens will not become rubles; the main function of the travel document will remain.

Cryptocurrency is based on blockchain, and token is based on cryptocurrency, that is, a token is a derivative of cryptocurrency.

Practical application of ERC20

Initially, tokens were used during the initial fundraising for the development of the company. They were a digital asset with fixed obligations. Tokens were purchased directly from the developers and could not be sold or bought anywhere else. The Ethereum ICO took place in 2014 and raised more than $16 million. Ethereum has attracted the attention of representatives of many industries, as it can be used to optimize and digitize inefficient business processes in the future.

Tokens are classified as cryptocurrency if they have their own blockchain and can be traded on exchanges. Examples of ERC20 tokens that have created their own blockchain are Tron and EOS. Tron created its blockchain because of its promise: blockchain games are becoming more popular every day. EOS is a competitor to Ethereum, mainly used for decentralized exchanges and gambling.

Tokens are now assets in the form of money and value that provide membership in a program or proof of ownership. They are traded on exchanges along with cryptocurrencies, used as points in loyalty programs, as well as certificates for asset ownership.

The cryptocurrency market operates with reliable stablecoins of the ERC20 standard, which are traded on major crypto exchanges.

Stablecoins are digital currencies with a fixed rate: 1 unit of tokens is equal to 1 unit of the corresponding fiat currency, for example, the dollar.

Unlike regular cryptocurrency, stablecoins are not subject to price fluctuations. The issued stablecoins are confirmed by real money saved in the bank, the accounts of the issuing companies are audited every month.

Which tokens use the ERC20 standard

A single standard, ease of creation and compatibility with platforms have led to the widespread use of ERC20 tokens. Below are some examples of popular tokens using the ERC20 protocol.

USDT Tether

A stablecoin released by Tether Limited in 2020. Pegged to the US dollar. The price of USDT Tether is backed by American dollars in the company’s accounts.

Other fiat currencies have their own stableblocks. For example, Binance GBP is backed by the British pound, and STASIS is backed by the euro.

The old system was based on the Omni protocol, based on the Bitcoin blockchain. Due to high fees and long transaction confirmation times, the company decided to use the Ethereum blockchain.

WETH

ETH, or ether, is the base currency of Ethereum. Using the RELAY application, it can be exchanged for ERC20 tokens.

WETH is “wrapped ETH” or “Ether in a shell.” It was introduced because ETH predates the adoption of the ERC20 standard and does not comply with it. Decentralized platforms based on Ethereum exchange tokens between users based on smart contracts. For the exchange to be correct, the tokens must be of the same standard.

WETH is used to exchange ETH tokens for those compliant with the ERC20 protocol.

Numerous network users, including large corporations with capital, are interested in the development of the base currency.

Among them:

• the Wrapped Ether system holding over 2 million ETH worth $380 million;
• one of the leading cryptocurrency exchanges Binance, $370 million;
• Bitfinex exchange, less than 2 million ETH.

LCS

LocalCoinSwap is a decentralized platform that provides users with the opportunity to directly purchase and sell cryptocurrency using any of the available payment methods. LCS allows you to find a buyer or seller of currency and carry out a transaction without the involvement of websites and wallets. The platform uses a traditional escrow system in which cryptocurrency funds are stored to be exchanged. When the payment is confirmed by the buyer and seller, the system sends the coins to the buyer. The platform gives the right to receive dividends in a ratio of 1 to 1 at the end of the quarter.

Which wallets support ERC20 tokens

Both hardware and electronic wallets can be used to store ERC20 tokens. Below are examples of such wallets.

Ledger

Ledger is a French company that has been producing hardware wallets for cryptocurrencies since 2014. Ledger wallets are physical devices that store cryptocurrency. The company's main products are Ledger Nano S and Ledger Nano X storages, as well as the Ledger Live application. The Nano X is newer and more expensive than the Nano S. The Ledger Nano X not only supports USB connectivity, but also connects to a smartphone via Bluetooth. Ledger's hardware wallets are hack-resistant and can be restored in case of loss.

MyEtherWallet

MyEtherWallet or MEW is a wallet for securely storing coins running on the Ethereum blockchain, which appeared in 2020. In addition to the wallet, the developers also created an educational portal, MEWtopia, that teaches users how to interact with the blockchain. MyEtherWallet is presented as the MEW Wallet mobile application and MEW CX browser extension. MEW Wallet is an updated version of the MEW Connect mobile application with the ability to access the Ethereum blockchain. It works on the principle of a hardware wallet and allows you to store, buy and send cryptocurrency.

Best ERC20 Wallets Available

Below is a list of convenient wallets that allow you to easily store ERC20 coins.

These are both hardware wallets and mobile wallets, web wallets and others.

Atomic Wallet

If simplicity and reliability come first for you, then the Atomic Wallet multi-currency wallet will be the ideal tool for storing ERC-20 coins.

Firstly, the wallet allows you to create a complex password, and secondly (and most importantly), the generated SEED phrase is stored only on your computer , which means that only you manage your money!

Atomic Wallet is designed to be simple enough for anyone to use, even without any technical experience.

Atomic Wallet allows you to securely store dozens of ERC-20 coins, for example, such as:

1. Ethereum
2. Tether (USDT)
3. Ethereum Classic
4. Ontology
5. Tezos
6. Lisk
7. Maker

And many other coins, which you can find on the official website of the wallet.

Storing ERC-20 tokens on Atomic Wallet

In order to store the ERC-20 coin(s) you need, download the Atomic Wallet wallet from the official website for the operating system you need:

• Windows
• Linux
• Mac

Start installing the wallet. After the wallet starts, click on the “New Wallet” button.

Next, on the next page, create and enter a strong password. It is advisable to use non-existent words, for example:

"TGhdwui12554PPGMqfhz12"

Now to access and restore your wallet you need to do the following:

“Please write down a 12-word backup phrase and keep a copy in a safe place. This will allow you to restore your wallet at any time."

Be sure to write down the SEED phrase on paper !

After you have rewritten the seed phrase, click on the “Open Wallet” button.

That's all, your wallet is ready to use!

Now in the wallet that opens, in the upper left corner, in the “Search...” field, start entering the name of the cryptocurrency you need. For example, enter ETC if you want to store Ethereum Classic coins, or in the general list of coins, find the ones you need.

Please note that the following information is written opposite each coin:

1. The amount of ETC (in the case of the example ERC-20 coin) that is stored in the wallet
2. Value in Dollars (Total of your ETC, or other coin)
3. Coin price (in our case ETC price)
4. Cryptocurrency growth or decline as a percentage

To create a new wallet, click on the name of the coin. In the window that opens, click on the “ Receive ” button. A new page will open showing your wallet!

Copy it to move your ETC (or other ERC-20 coins) coins to your Atomic Wallet.

That's all, you have created a wallet for ERC-20 coins and now you can securely store coins here

Please note that Atomic Wallet is not only a reliable wallet, but also a place where you can earn money. You can stake the following coins (to make money on them):

1. COSMOS
2. Tezos
3. Ontology
4. Tron
5. Komodo
6. Neo

And other coins, you can find the entire list of staking coins on the official website of the wallet!

Ledger Nano S [Hardware Wallet]

We've talked a lot about the Ledger Nano S on our site, talking about its pros and cons. Again, this wallet is very convenient as it is easy to use.

It claims to be an offline wallet because it uses your computer's browser to generate the necessary data, and nothing is stored on the Ledger Nano S servers. Plus, you get control of your private key, so you don't need to trust third parties to keep your funds safe.

The wallet has an active development team. It has the following degrees of protection:

Built-in security feature - PIN code

Seed keys

Passphrases

In addition, it supports more than 20 cryptocurrencies in a single device and is constantly being developed to provide security for several more currencies.

That is, in fact, you receive a flash drive-safe in which you can easily store cryptocurrencies and at any time quickly and conveniently transfer them to an exchange or wallet.

You can use any ERC20 token on the Ledger Nano S. It is also the cheapest multi-currency hardware wallet at $65.

Pros: User-friendly screen, device is protected by a metal rotating cover, multi-currency, third-party apps can run from this device, U2F support, when restoring a wallet, the entire process can be done from the device without even connecting it to a computer, fairly inexpensive (~$65)

Cons: Not very advanced wallet software (no transaction tagging), no ability to create hidden accounts, no password manager.

You can buy Ledger Nano S in the official store.

Trezor [Hardware Wallet]

The Trezor wallet is one of the oldest hardware wallets in the cryptosphere, and it comes as no surprise that it supports all ERC20 tokens.

Like Ledger, Trezor also comes with an OLED screen for ease of use.

We recently published a video on our YouTube channel: first impressions of using the Trezor hardware wallet.

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It has the following security features:

• PIN protection
• Passphrase

Additionally, the Trezor development team is very active and respected in the community.

Trezor is definitely another hardware wallet that you can use for any type of ERC20 token. Here is the official guide for using ERC20 tokens on a Trezor device.

Trezor is available in 3 colors - white, gray and black.

Pros: Strong security and privacy, cold storage feature, easy to use web interface, built-in screen, open source software, very simple and easy for beginners.

Cons: costs 99 Euro (no discount), must have a device with internet access to send ERC20 tokens.

You can buy Trezor through our affiliate program with a discount for only 69 Euros using the link: https://shop.trezor.io/product/trezor-one-white

We also advise you to watch the Trezor wallet setup from our YouTube channel to understand how simple and easy it is to use:

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MyEtherWallet [Web wallet]

MyEtherWallet is one of the most common wallets when it comes to managing ERC20 tokens.

Storing ERC20 tokens on MyEtherWallet does not cause any problems or complaints from users.

MyEtherWallet is an open source web wallet written in Javascript. This is a convenient application for securing Ether, ERC20 tokens and interacting with smart contracts.

But with all this, it still has disadvantages.

Since this is a hot wallet, it is best not to store a lot of funds on it. But if you use MyEtherWallet with Ledger Nano S, it is the best wallet to use because your funds cannot be stolen.

From a web browser interface, you can even use ERC20 stored on your Trezor or Ledger Nano S hardware wallet through MyEtherWallet.

You can learn how to move ERC20 tokens from Ledger Nano S to MyEtherWallet here.

MetaMask [web wallet]

MetaMask is another easy-to-use Ethereum wallet that is loved by a large number of users and is free to use.

It is similar to a browser for accessing the Ethereum network. It not only allows you to store and send Ethereum, but also allows you to manage ERC20 tokens on it.

Additionally, it has an active development team that has designed MetaMask in such a way that you are always in control of your funds using the seed key that you receive during the initial setup.

The wallet has an intuitive design where you can easily switch between the testnet and the Ethereum mainnet.

Below is a video from the official MetaMask youtube channel demonstrating how the wallet works:

Read: What is MetaMask? How does it work, security? Step-by-step installation instructions

Coinomi [Mobile wallet]

Coinomi is a popular multi-currency mobile wallet that has become famous for its support for coin forks. But just like a wallet with an active community and an active development team, Coinomi also supports Ethereum and Ethereum-based tokens (ERC20 tokens).

Plus, this wallet is always in control of your funds as it is an HD wallet with a PIN, seed key and passphrase that you can enable at any time.

However, the token feature is not enabled by default in Coinomi, so you need to configure it first and then enable the token option by adding your selected tokens.

Here's how you can do it:

Go to the wallet overview section and click “ + TOKENS ”

Click on " Ethereum " to see a list of tokens.

Now select your token and click " FINISH "

The coinomi wallet is available for both Android and IOS.

Trust [Mobile wallet]

Trust wallet is a mobile wallet that has recently gained quite a bit of popularity following its acquisition by Binance.

Trust wallet is a wallet for Ethereum-based ERC20 tokens and ERC223 tokens. Here in this wallet, your private key is stored locally only and is protected by many layers of security.

Use this wallet to send, receive, store and track Ethereum (ETH), Ethereum Classic (ETC), Callisto (CLO) and over 30,000 supported ERC20 tokens including EOS, OmiseGO, Qtum, Kyber Network, EOS, BAT, TenXPay and Augur and many others.

Trust wallet also acts as a Web3 browser that allows you to interact with decentralized applications (DApps) directly from the application.

Disadvantages of ERC20 tokens

The ERC-20 standard was created first. Since 2020, there have been reports that it is imperfect and cryptocurrency is lost during transactions.

Automatic contract execution

In 2020, developer Dexaran described a bug that had previously caused millions of dollars to be lost. The transaction is completed if the transfer is successful, and if there is an error, the transfer of funds must be revoked. If ERC-20 works with smart contracts that do not support this standard, the transaction will get stuck, resulting in tokens being frozen and lost.

BatchOverFlow vulnerability

In 2020, the system that analyzes the transfer of tokens raised an alarm in connection with an unusual transaction: a gigantic number of means of payment were transferred. The test result showed that this transfer was caused by an “in-the-wild” that exploited a vulnerability in the contract. Scanning and analysis confirmed that more than a dozen contracts are vulnerable to the overflow problem.

The problem with integer overflow is in the batchTransfer .

In line 257 amount , the amount variable is cnt by _value . Here _value is an arbitrary 256-bit . If the parameter is infinitely large, the sum overflows and is reset to zero. In this case, the hacker can successfully pass the check on lines 258–259 and reverse the subtraction on line 261 .

This bug allowed attackers to create large numbers of tokens, send them to a common address, and manipulate the market. After completing the security review of ERC20 smart contracts, the project team announced that they have installed token protection against overflow errors.

Easy to Deploy

Deploying a token becomes technically simple. The simple creation of digital assets makes ICOs a common procedure, giving the opportunity to carry them out to teams unable to fulfill their obligations to investors. As a result, tokens began to appear that are used to make money from investors, rather than from developing the project. Let's give specific examples.

In 2020, the US Securities and Exchange Commission (SEC) brought fraud charges against the founders of PlexCoin, who attracted investors with the promise of a fantastic return of 1,354% in 29 days. PlexCoin deceived investors by quoting fictitious market experts. The investigation found that the founders spent $200 thousand of the funds raised for their own needs.

At the beginning of 2020, the founder of the Fantasy Market project, Jonathan Lucas, fled. He managed to raise more than $4 million, promising to invest it in the development of a platform on which tokens would be used to pay for watching porn.

Another striking example of fraud is the Confido project, which issued tokens, collected about 375 thousand dollars, and then deleted all data about itself.