To facilitate development on a distributed network, some common standard or rule proves necessary, and it was with this in mind that the standards for creating and executing tokens were created on the Ethereum network (I will define token a bit later). These standards are referred to as ERC, followed by a number, and originate from a proposal, or suggestion presented to the Ethereum community on how certain aspects or functionalities of the network should operate. The acronym stands for Ethereum Request for Change (ERC).
Just as an architect would present a new building design to be reviewed and discussed by other architects and engineers before construction, a developer, or group of developers, presents an ERC proposal for the Ethereum community to review, discuss, and eventually adopt.
These proposals that follow a growing number, once accepted and implemented, become standards on the Ethereum network. The most notable among them are the ERC-20 and ERC-721 standards, which refer to standards for creating tokens.
ERC-20 is perhaps the most recognized standard in the Ethereum space.
It defines a common set of rules that all tokens can follow on the Ethereum network, allowing any token that follows this standard to be interchangeable or compatible with other tokens that also follow the same standard. This means that if you develop a wallet that supports an ERC-20 token, it will also be able to support other ERC-20 tokens without the need for significant changes. This standardization revolutionized the way projects launch new tokens, making the entire process much more streamlined.
On the other hand, we have the ERC-721 standard, which introduced the concept of non-fungible tokens (NFTs) to the world. Unlike ERC-20 tokens, which are interchangeable, with each token being equal to another, ERC-721 tokens are unique. Each token has a unique identifier, making it distinct from other tokens.
In addition to these two, we also have other standards that introduce novelty to the Ethereum network, such as ERC-4337, which introduces ways to implement Account Abstraction (a topic we will address later), and ERC-6551, which ensures that the NFT cannot be transferred from one account to another, aligning with Vitalik's text on Soulbounds2.
In essence, ERC is the way the Ethereum community collaborates, discusses, and defines new guidelines to ensure that the network continues to grow in a harmonious and innovative manner.