First, you should understand what a token is and how it differs from a coin. All cryptocurrencies that exist on their own blockchains (SOL, BTC, ETH) are coins. But cryptocurrencies that do not have their own blockchain, but exist on the basis of someone else’s, are tokens. Examples include 1INCH, The Sandbox, Aave - these are all tokens on the Ethereum blockchain.
Now about the standards. A standard is a set of rules and agreements governing the operation of a cryptocurrency token. Token standards define the key functionality and properties of blockchain tokens. Standards are needed for several reasons, the main ones being compatibility, interoperability and efficiency.
The token standard ensures that all products created under this standard can interoperate with each other and work together. If a project issues a token based on a token standard, then the new token will be compatible with existing platforms and applications, including wallets.
In programming, having a connectable system allows developers to reuse existing components to create new products. This also applies to token creation: using token standards speeds up the development of core functionality, leaving more time for experimentation and innovation.
In order to understand what is written below, you need to know what a smart contract is. A smart contract is a kind of digital agreement (computer program) that sets rules for fulfilling the terms of the agreement between two parties. When these conditions are met, the smart contract automatically performs certain actions, such as transferring money from the buyer to the seller.
Token standards also simplify interactions between smart contracts. Smart contracts that implement token standards and the tokens themselves can be used to track created tokens. For example, ERC-20 tokens allow you to check the history of transfers and other token data.
The two most popular token standards are the previously mentioned ERC-20 and BEP-20. ERC-20 is a token standard that is used to develop fungible assets that follow common rules. This standard operates on the Ethereum blockchain. Please pay attention to the word “interchangeable”. BEP-20 is the BNB Smart Chain (BSC) token standard.
There is also the ERC-721 standard, which is the basis for the creation of a significant part of the non-fungible tokens (NFTs) on the Ethereum blockchain. By the way, the first NFT was created on this blockchain. The main difference between ERC-721 and ERC-20 is that it gives each token a unique tokenID, which is what non-fungibility is based on. That is, 1 such token is not equal to another such token.
