Token standards are foundational to how digital assets are created and operate on blockchain platforms like Ethereum. They define a shared set of rules that smart contracts must follow so that tokens can be recognised, transferred and used consistently across wallets, marketplaces and decentralised applications (dApps). Ethereum’s most widely used standards are ERC-20, ERC-721 and ERC-1155. Each plays a distinct role and supports different types of digital assets.
What Is a Token Standard?
A token standard is a technical specification outlining how tokens should behave on a blockchain. These standards ensure interoperability — meaning tokens created by one developer can be sent, received and used by other applications without bespoke integration. On Ethereum, these specifications are defined through formal proposals known as Ethereum Request for Comments (ERCs), with each standard numbered and agreed by the community.
ERC-20: The Fungible Token Standard
ERC-20 is the most established token standard on Ethereum and underpins the vast majority of fungible tokens. “Fungible” means that each token is interchangeable with another of the same type — similar to pounds sterling or other currencies where one unit holds equal value to another.
This standard sets out required functions for transferring tokens, checking balances and managing allowances (permissions for third-party spending). Because wallets, exchanges and dApps universally support these functions, ERC-20 tokens can be widely exchanged and integrated across services.
Use cases for ERC-20 include:
- Cryptocurrencies and stablecoins
- Governance tokens for decentralised finance (DeFi)
- Utility tokens for access or rewards
ERC-721: The Non-Fungible Token (NFT) Standard
ERC-721 was the first standard specifically designed for non-fungible tokens (NFTs). Unlike ERC-20 tokens, each ERC-721 token is unique and cannot be exchanged on a one-to-one basis with another token of the same standard. This uniqueness makes them ideal for representing distinct digital assets such as artwork, game items, virtual land or collectibles.
ERC-721 tokens include unique identifiers and metadata so that each token can be tracked individually and linked to a specific asset or owner. The standard also defines mechanisms for safe transfer and ownership tracking, which are essential when tokens represent valuable or one-of-a-kind items.
Common use cases include:
- Digital art and collectibles
- Proof of ownership for digital assets
- Game characters and unique items
ERC-1155: A Multi-Token Standard
ERC-1155 expands on earlier standards by allowing a single smart contract to govern multiple token types — whether fungible, non-fungible or somewhere in between. This makes it especially efficient for use cases that involve many different assets under one umbrella, such as gaming ecosystems.
Unlike ERC-20 and ERC-721, which require separate contracts for each token type, an ERC-1155 contract can manage varied token types and support batch transfers. Batch operations reduce transaction costs and improve usability where many assets need to be moved or modified together.
Typical applications include:
- Game asset management (weapons, skins, consumables)
- Collections with both unique and standard items
- Platforms needing efficient bulk transfers
Key Differences at a Glance
- Fungibility: ERC-20 tokens are all identical; ERC-721 tokens are unique; ERC-1155 supports both.
- Contract Efficiency: ERC-1155 allows many tokens under one contract; the others typically require one contract per token type.
- Use Cases: ERC-20 is suited to currencies and utility tokens, ERC-721 to unique digital assets, and ERC-1155 to portfolios of mixed assets.
What This Means in Practice
Understanding the right token standard helps when planning a project. If you’re developing a currency or tradable asset that needs wide exchange support, ERC-20 is usually the best fit. For digital items with individual identity — such as unique artwork or a rare game item — ERC-721 is more suitable. ERC-1155 is chosen if you need flexibility to manage many asset types efficiently, commonly in gaming or complex NFT collections.
Real-World Considerations
- Integration: Most wallets and marketplaces recognise ERC-20 and ERC-721 natively, ensuring broad accessibility.
- Costs: The more complex the token interactions (e.g. many individual NFT transfers), the higher the transaction fees can be. Standards like ERC-1155 can reduce costs through batch processing.
- Future Developments: New standards continue to evolve to address specific needs, such as finance-focused tokens or specialised NFTs.
Conclusion
ERC token standards are essential frameworks that make Ethereum’s ecosystem interoperable and efficient. ERC-20 provides a robust foundation for fungible tokens, ERC-721 introduced the concept of unique digital ownership with NFTs, and ERC-1155 offers a flexible, efficient way to manage multiple token types in a single contract. Knowing how they differ and when to use each one is critical for developers, investors and users engaging with blockchain assets.