The Emergence of Ethereum
Introduced by Vitalik Buterin, Ethereum is fundamentally a smart contract platform and a cryptocurrency technology. Ethereum is a reliable, immutable, and decentralized system with an anonymous and distributed data storage method spread over many devices. In addition, Ethereum has a programmable structure and allows applications to be developed and run within this structure. These applications are called dApps. Vitalik Buterin, a software developer with a keen interest in cryptocurrencies, revealed Ethereum at the end of 2013. After raising funds with an ICO (Initial Coin Offering) on Aug. 30, 2014, Ethereum went live on July 30, 2015.
What Are Ethereum Requests for Comments (ERC)?
Ethereum Requests for Comments (ERC) are protocols in which the operating principles and commands are determined in the Ethereum network. The numbers at the end of these protocols refer to the type of protocol. The ERC-20 standard was developed by Vitalik Buterin and Fabian Vogelsteller after Ethereum was launched in 2015. So, the ERC-20 standard emerged later than Ethereum. That is why Wrapped Ether (wETH), which is the conversion of Ether to the ERC-20 standard, is used on decentralized platforms or applications working in the ERC-20 standard. For more information on Wrapped Ether (wETH), you can click here to read our article “What Is a Wrapped Token?” Over time, new standards have emerged for many types of tokens. These standards vary depending on the type of tokens and the structures they serve. Let’s take a closer look at the ERC-20 and ERC-721 standards, which are the most widely used token standards on the Ethereum network.
What Are the ERC-20 and ERC-721 Standards?
Projects that do not have their own blockchains can use another blockchain to issue cryptocurrencies. These cryptocurrencies that do not have their own blockchains and are issued on the Ethereum blockchain are called Tokens. The Ethereum blockchain is the most preferred blockchain for token creation due to its vast ecosystem and many smart contract features. Tokens are created in accordance with certain rules and protocols, two of which are the ERC-20 and ERC-721 protocols. Thanks to this feature provided by Ethereum, users can easily complete the token creation process.
The ERC-20 and ERC-721 standards differ from each other in many respects. And the most important one of these distinctions is that the tokens created in accordance with the ERC-20 standard can be divided and exchanged. Here, we have two concepts to look at: Fungible and Non-Fungible Tokens. For more information on Fungible and Non-Fungible Tokens, you can click here to read our article “What Is NFT?”. Unlike the ERC-20 standard, the ERC-721 standard is used for non-fungible token creation. The tokens created in this standard are not interchangeable and each have unique features.
ERC-20
Since the ERC-20 standards were introduced in 2015, they have been adopted by many decentralized platforms, applications, and developers on the network, thus enabling interaction between smart contracts through this protocol. Let’s say that you want to create a token. Instead of setting the standards, choosing the ERC-20 standards, which have already been used in the creation of thousands of tokens on the Ethereum network, will provide many advantages regarding both time and integration. When you create an ERC-20 token, your token will work on the Ethereum blockchain and be integrated with thousands of decentralized platforms or applications running on the same blockchain.
Let’s imagine a situation where there is no standard. There would be hundreds, maybe thousands, of tokens created in different standards. And that would lead to great losses regarding both time and costs since there would be a separate integration process for each token. ERC-20 tokens can work with each other and can be exchanged in many decentralized applications. That’s a huge convenience for users in the cryptocurrency ecosystem.
ERC-721
The ERC-721 standard is also a token creation standard on the Ethereum blockchain, like ERC-20. The difference between ERC-721 tokens and ERC-20 tokens is that each ERC-721 token is unique and non-convertible. On the other hand, ERC-20 tokens can be exchanged and converted between each other, and they are interchangeable. For example, there is no difference between 1 BTXN Token and 1 other BTXN Token. Like fiat currencies, these tokens are interchangeable. There is no difference between a $10 bill and any other $10 bill on the market, and ERC-20 tokens of the same type are no different. But ERC-721 tokens are different. Each ERC-721 token is unique and each has a different value. We can say that such tokens are like works of art. Every piece of art, like a painting or a song, is unique, and so are these tokens. That is why they cannot be exchanged like ERC-20 tokens.
A game called CryptoKitties is one of the best examples of the ERC-721 standard used in the creation of NFTs, which has recently gained worldwide popularity. In this blockchain-based virtual cat game, each user has unique cats, and these digital cat assets are processed and stored on the Ethereum blockchain.
