Token standards are a set of rules and protocols that define how blockchain tokens function—governing everything from how they are issued and transferred to how they interact with wallets, exchanges, and decentralized applications (dApps). These standards ensure consistency, compatibility, and reliability across the rapidly expanding digital asset ecosystem. Prominent examples include ERC-20, BEP-20, ERC-721, and ERC-1155, each designed for specific use cases across various blockchain networks.
Understanding token standards is essential for developers, investors, and users navigating the world of cryptocurrencies and decentralized finance (DeFi). They serve as blueprints that streamline development, enhance interoperability, and reduce technical complexity.
Why Token Standards Matter
Without standardized frameworks, every project would need to build its token system from scratch—leading to fragmentation, incompatibility, and inefficiency. Token standards solve this by providing a common foundation.
Interoperability Across Platforms
One of the most significant advantages of token standards is interoperability. When tokens adhere to the same standard—like ERC-20 on Ethereum—they can seamlessly interact with existing infrastructure such as wallets, exchanges, and DeFi protocols.
For example, any wallet supporting ERC-20 can store, send, and receive all tokens built on that standard. This eliminates the need for users to maintain separate wallets for each token. It also enables smooth trading across decentralized exchanges (DEXs), where ERC-20 tokens can be swapped directly without custom integration.
Without these standards, exchanging different cryptocurrencies would require complex, case-by-case solutions—making the entire ecosystem far less accessible.
Enhanced Developer Composability
In blockchain development, composability refers to the ability to combine different protocols and smart contracts like building blocks. Token standards make this possible by ensuring predictable behavior.
Developers don’t need to rewrite core functions like balance tracking or transfer logic when launching new tokens. Instead, they can rely on established interfaces defined by standards such as BEP-20 or ERC-721. This accelerates innovation and allows teams to focus on unique features rather than reinventing foundational components.
Imagine building a decentralized game where players earn in-game currency and collect rare NFTs. With ERC-20 for fungible tokens and ERC-721 for unique collectibles, developers can integrate both using proven, secure codebases—reducing risk and speeding up deployment.
Operational Efficiency Through Standardization
Token standards improve efficiency in smart contract operations. Contracts can interact with compliant tokens using Application Binary Interfaces (ABIs) that define standardized functions such as transfer(), balanceOf(), and approve().
For instance:
totalSupply()returns the total number of tokens in circulation.balanceOf(address)checks an account’s token balance.transferFrom()enables third-party contracts (like DEXs) to move tokens on behalf of users—with permission.
These standardized methods allow automated systems to monitor, verify, and execute transactions reliably—critical for high-frequency DeFi applications like lending platforms and automated market makers.
Major Token Standards in Use Today
Different blockchains and use cases have led to the emergence of several key token standards. Let’s explore the most widely adopted ones.
BEP-20: The BNB Smart Chain Standard
BEP-20 is the primary token standard for BNB Smart Chain (BSC), designed to support a wide range of digital assets including utility tokens, stablecoins, and wrapped assets.
It builds upon the ERC-20 framework but adds extended functionalities such as:
- Token blacklisting (for regulatory compliance)
- Minting and pausing mechanisms
- Native support for cross-chain interoperability
Core functions of BEP-20 include:
TotalSupply: Defines maximum token supplyBalanceOf: Retrieves user balanceTransfer: Allows direct peer-to-peer transfersApproveandAllowance: Control delegated spending via smart contracts
Because BSC offers lower transaction fees and faster confirmation times than Ethereum, BEP-20 has become a popular choice for DeFi projects and new token launches.
👉 Explore how modern ecosystems leverage BEP-20 for scalable, cost-effective token solutions.
ERC-20: The Pioneer of Fungible Tokens
Introduced in 2015 by Fabian Vogelsteller, ERC-20 revolutionized token creation on the Ethereum network. It remains the most widely used standard for fungible tokens—those where every unit is identical and interchangeable.
All ERC-20 tokens share the same underlying structure:
- Identical value per unit
- Divisible into smaller units (e.g., 18 decimals)
- Fully compatible with Ethereum-based dApps
Tokens like DAI, USDT (on Ethereum), and UNI are all ERC-20 compliant. This uniformity allows them to work seamlessly across wallets (MetaMask, Trust Wallet), exchanges (Coinbase, OKX), and DeFi platforms (Aave, Uniswap).
While similar to BEP-20 in functionality, ERC-20 operates exclusively on the Ethereum blockchain—highlighting the importance of understanding which network a token belongs to.
ERC-721: The Foundation of NFTs
If ERC-20 powers fungible tokens, ERC-721 is the backbone of non-fungible tokens (NFTs). Each ERC-721 token is unique, distinguished by a globally unique tokenId.
This makes it ideal for digital art, collectibles, virtual real estate, and proof-of-attendance tokens (POAPs). No two NFTs are alike—even if they belong to the same collection.
Key features include:
- Unique identification via
tokenId - Ownership tracking through blockchain records
- Transferability between addresses
- Support for metadata (e.g., image URL, attributes)
Most NFT marketplaces—including OpenSea and Blur—support ERC-721, making it the de facto standard for Ethereum-based NFTs.
ERC-1155: The Multi-Token Innovation
Developed by Enjin, ERC-1155 introduces a flexible multi-token standard capable of handling both fungible and non-fungible assets within a single contract.
This means one smart contract can manage:
- Thousands of identical utility tokens (like in-game currency)
- Unique NFTs (like legendary weapons)
- Semi-fungible items (e.g., event tickets)
Key advantages:
- Batch transfers: Send multiple token types in one transaction
- Batch balance checks: Query balances of several tokens at once
- Bulk approvals: Authorize spending across multiple assets efficiently
- Gas savings: Reduced costs due to fewer contract interactions
ERC-1155 is especially useful in gaming and metaverse applications where efficiency and scalability are crucial.
Limitations of Token Standards
Despite their benefits, token standards face inherent limitations—primarily lack of cross-standard compatibility. An ERC-20 token cannot natively function on BSC, nor can an NFT on Solana interact directly with Ethereum dApps.
This fragmentation leads to user friction—such as being unable to use Bitcoin (BTC) directly within Ethereum-based DeFi protocols.
Bridging the Gap: Wrapped Tokens
To overcome interoperability barriers, the industry has adopted wrapped tokens—digital assets pegged to another cryptocurrency but issued on a different blockchain.
For example:
- Wrapped BTC (WBTC) is an ERC-20 token backed 1:1 by Bitcoin
- WETH allows ETH to be used as a tradable ERC-20 asset in DeFi
The original asset is held in a secure custodial vault ("wrapped"), while its counterpart circulates on another chain. This enables cross-chain functionality while maintaining trust and value equivalence.
Cross-chain bridges further enhance this capability by facilitating asset transfers between disparate networks—though they come with security considerations that users must evaluate carefully.
Frequently Asked Questions (FAQ)
Q: What is the difference between ERC-20 and BEP-20?
A: Both are fungible token standards with similar functions. ERC-20 runs on Ethereum, while BEP-20 operates on BNB Smart Chain. BEP-20 generally offers lower fees and faster transactions.
Q: Can one blockchain support multiple token standards?
A: Yes. For example, Ethereum supports ERC-20 (fungible), ERC-721 (NFTs), and ERC-1155 (multi-token), enabling diverse applications within a single ecosystem.
Q: Are all NFTs based on ERC-721?
A: Most Ethereum NFTs use ERC-721, but many now adopt ERC-1155 for efficiency—especially in gaming environments where batch operations save gas fees.
Q: Do token standards affect security?
A: While standards themselves are secure when properly implemented, poorly coded contracts or flawed audits can introduce vulnerabilities—even if they follow ERC or BEP guidelines.
Q: Can I convert a BEP-20 token to ERC-20?
A: Yes, through cross-chain bridges or centralized exchanges that support both networks. Always verify network compatibility before transferring tokens.
Q: Why do we need so many token standards?
A: Different use cases demand different capabilities. Fungibility, uniqueness, batch processing, and cross-chain needs have driven the evolution from simple ERC-20 to advanced standards like ERC-1155.
Token standards form the invisible architecture powering today's digital economy. From enabling seamless DeFi interactions to unlocking creative possibilities in the metaverse, they ensure order in a decentralized world. As blockchain technology evolves, so too will these foundational protocols—ushaping greater connectivity, functionality, and user empowerment.