Ethereum has revolutionized the digital asset landscape by introducing a powerful framework for creating and managing tokens. At the heart of this innovation are ERC tokens — standardized digital assets built on the Ethereum blockchain. These tokens power everything from cryptocurrencies and decentralized finance (DeFi) platforms to non-fungible tokens (NFTs) and gaming ecosystems.
But what exactly are ERC tokens, and how do they differ from one another? In this guide, we’ll break down the most common types — ERC-20, ERC-721, ERC-1155, and ERC-4626 — in simple terms, helping you understand their unique functions, use cases, and why they matter in today’s blockchain world.
Understanding ERC: The Basics
Before diving into specific token standards, it's important to understand what "ERC" means. ERC stands for Ethereum Request for Comment — a formal proposal used to suggest improvements or new features to the Ethereum network. Once approved by developers and the community, these proposals become official standards.
These standards define how tokens behave — including how they are created, transferred, and interacted with across wallets, exchanges, and decentralized applications (dApps). This uniformity ensures compatibility and security across the Ethereum ecosystem.
👉 Discover how Ethereum-powered tokens are shaping the future of digital ownership.
ERC-20: The Foundation of Fungible Tokens
Launched in 2015, ERC-20 is the most widely adopted token standard on Ethereum. It defines a set of rules for creating fungible tokens — meaning each token is identical and interchangeable, like traditional currency.
Key Features of ERC-20:
- Interchangeable units: One token equals another (e.g., 1 DAI = 1 DAI).
- Used for utility and governance: Powers DeFi protocols, staking mechanisms, and voting rights.
- Supported universally: Almost all wallets, exchanges, and dApps support ERC-20 tokens.
Popular examples include:
- USDC (a stablecoin pegged to the US dollar)
- DAI (decentralized stablecoin)
- UNI (governance token for Uniswap)
ERC-20 tokens are essential in decentralized finance (DeFi), where they facilitate lending, borrowing, trading, and yield farming. Their simplicity and wide adoption make them the go-to choice for launching new crypto projects.
ERC-721: The Birth of Non-Fungible Tokens (NFTs)
While ERC-20 handles interchangeable assets, ERC-721 was designed for non-fungible tokens — unique digital assets that cannot be replicated or exchanged on a one-to-one basis.
Each ERC-721 token has a distinct identity and metadata, making it perfect for representing:
- Digital art
- Collectibles
- Virtual real estate
- In-game items
- Membership passes
Why ERC-721 Matters:
- Uniqueness: Every token is one-of-a-kind.
- Ownership verification: Blockchain ensures provenance and authenticity.
- Revolutionized digital creativity: Enabled artists and creators to monetize work directly.
A famous example is the Bored Ape Yacht Club (BAYC) — a collection of 10,000 unique NFTs that grant membership benefits and have sold for millions.
👉 See how NFTs are redefining digital ownership and creative freedom.
ERC-1155: The Hybrid Token Standard
Introduced by Enjin, ERC-1155 improves upon both ERC-20 and ERC-721 by allowing a single smart contract to manage multiple token types — both fungible and non-fungible.
This multi-token standard brings greater efficiency and flexibility.
Advantages of ERC-1155:
- Batch transfers: Send multiple token types in one transaction.
- Reduced gas fees: Lower costs due to fewer contract deployments.
- Ideal for gaming: Manage in-game currencies (fungible) and rare items (non-fungible) seamlessly.
For instance, a game developer can use one contract to issue:
- Coins (ERC-20 style)
- Legendary swords (ERC-721 style)
All within the same system.
This versatility makes ERC-1155 increasingly popular in metaverse platforms and blockchain-based games.
ERC-4626: The Future of Yield-Bearing Tokens
The newest addition to the family, ERC-4626, standardizes yield-bearing tokens — those that automatically accrue interest over time. These are commonly used in DeFi strategies like staking pools and liquidity vaults.
How ERC-4626 Works:
- Users deposit tokens into a vault.
- The vault invests them in yield-generating protocols.
- Deposited tokens grow in value as rewards accumulate.
- The balance increases automatically without requiring manual claims.
For example, depositing DAI into an ERC-4626-compliant vault might earn interest from lending platforms like Aave or Compound. Over time, your balance reflects both principal and earnings.
Benefits:
- Standardized interfaces: Easier integration across DeFi apps.
- Improved composability: Vaults can plug into other protocols seamlessly.
- Transparent yield tracking: Clear accounting of returns.
As DeFi matures, standards like ERC-4626 help bring institutional-grade financial tools to everyday users.
Frequently Asked Questions (FAQ)
What does “ERC” stand for?
ERC stands for Ethereum Request for Comment. It’s a protocol used to propose changes or new functionalities to the Ethereum blockchain. Once accepted, these become official standards like ERC-20 or ERC-721.
Are all Ethereum-based tokens ERC tokens?
Most are, but not all. While the majority follow ERC standards (like ERC-20 or ERC-721), some projects implement custom logic outside these norms. However, using established standards ensures better compatibility and trust.
Can an NFT be traded like a regular cryptocurrency?
Not directly. NFTs (like those under ERC-721) are non-fungible — each has unique value and properties. While you can sell or trade them on marketplaces like OpenSea, they don’t function like interchangeable coins such as ETH or USDC.
Is there a cost to create an ERC token?
Yes. Deploying any smart contract on Ethereum requires paying gas fees, which vary based on network congestion. Creating an ERC-20 token typically costs between $50–$500+, depending on conditions.
Which wallet supports all ERC token types?
Most modern crypto wallets — including MetaMask, Trust Wallet, and Coinbase Wallet — support ERC-20, ERC-721, and increasingly ERC-1155. Always check compatibility before transferring rare or hybrid tokens.
How do I verify if a token follows an ERC standard?
You can inspect its smart contract on Etherscan.io. Look for function names matching the standard (e.g., transferFrom, balanceOf) or check if it inherits from known interfaces like IERC20 or IERC721.
Final Thoughts: Why ERC Standards Matter
ERC tokens are more than just technical specifications — they’re the building blocks of a decentralized digital economy. By establishing clear rules for how tokens behave, these standards enable innovation at scale while ensuring interoperability and security.
Whether you're investing in DeFi, collecting NFTs, or exploring new blockchain games, understanding ERC-20, ERC-721, ERC-1155, and ERC-4626 gives you a competitive edge in navigating the evolving web3 landscape.
As Ethereum continues to evolve through upgrades like EIP-4844 and layer-2 scaling solutions, expect even more sophisticated token standards to emerge — further expanding what’s possible in decentralized finance and digital ownership.
👉 Stay ahead of the curve — explore how next-gen tokens are transforming finance today.
Core Keywords:
ERC tokens, Ethereum blockchain, ERC-20, ERC-721, NFTs, DeFi tokens, fungible tokens, non-fungible tokens