Why are there different crypto token standards?

Crypto token standards provide a set of predefined rules and criteria dictating a token's operation on its respective blockchain. These standards ensure compatibility, outlining the processes of token creation, minting, deployment, and destruction.

Being a subset of smart contract standards, token guidelines are crucial for blockchains with smart contract capabilities, steering the creation and deployment of new tokens. These standards are vital for tracking token performance and efficiency, assuring their interoperability and integration with existing applications.

What are the main types of crypto token standards?

Different blockchains often introduce various token standards to standardize the functions and parameters of tokens on their platforms. The list of token types is constantly growing and evolving but here are the main four we will focus on:

• Ethereum: ERC-20, ERC-721, ERC-777, ERC-1115

• Binance Smart Chain: BEP-20

• TRON: TRC-20, TRC-721, TRX, TRC-10

• Solana: SPL

Note: -20 denotes ‘regular’ crypto coins, -721 is the NFT standard, -1155 represent multiple asset classes and in the case of TRON, TRC-10 is a technical token standard.

What are the key differences?

Comparison ParameterERC-20BEP-20TRC-20SPLNetworkEthereum BlockchainBinance Smart ChainTRON BlockchainSolana Program LibraryConsensus MechanismProof of Stake (PoS)Proof of stake authority (PoSA)Delegated Proof of Stake (DPoS)Proof of Stake (PoS)Gas FeesHighest among allLower as compared to othersLower than ERC-20The lowest gas fees availableBlock Verification Speed15 seconds3 seconds3 seconds~400 millisecondsSecurityHighLowModerateHigh

Please continue reading if you’re looking for a deeper-dive into the token specifics and advantages and disadvantages for each token type.

ERC-20 Token Standard

ERC, short for Ethereum Request for Comments, sets the standard for Ethereum-based tokens. Tokens on this platform follow the ERC-20 guidelines. Using Ethereum's smart contracts, these tokens can be traded across various platforms.

Moreover, while ERC-20 tokens are primarily designed for Ethereum, they can also function on the BSC and TRON networks. Their compatibility with most decentralized exchanges gives them an edge over TRC-20 tokens.

Decentralization in blockchains like Ethereum ensures that the failure of a few validators won't cripple the network, as there are numerous others to shoulder the load.

Advantages:

1. Maturity: Being one of the first token standards, it has a well-established and tested environment.

2. Wide Acceptance: Supported by almost all exchanges, wallets, and many Dapps.

3. Decentralization: Ethereum is widely recognized for its decentralized nature.

4. Development Community: Large developer community and extensive resources/documentation available.

Disadvantages:

1. High Gas Fees: Especially during network congestion.

2. Scalability: The Ethereum network can get congested with high transaction volumes.

3. Immutability of Contracts: Once deployed, smart contracts can't be altered.

BEP-20 Token Standard

BEP-20 is a token standard introduced on Binance Smart Chain (BSC), an extension of the ERC-20 protocol, inheriting all its functionalities. Every token on BSC inherently follows the BEP-20 standard, outlining rules for token use, transfer, approval, and management.

BSC, a dedicated chain within Binance's ecosystem, supports smart contracts and decentralized applications (dapps). Notably, BSC is compatible with Ethereum's Virtual Machine (EVM), offering a swift and cost-effective transaction process. This compatibility means not only can you transfer ERC-20 tokens swiftly and cheaply using BEP tokens, but other tokens like Bitcoin, ETH, LTC, and USDT can also be transferred via BEP-20.

The advantages of BEP-20 are numerous: ERC-20 compatibility, Binance exchange support, inherent BEP-20 features, and cross-chain compatibility. Designed after the Binance Smart Chain's inception, BEP-20 has become its core standard, fostering innovation within the Binance ecosystem. While BSC was primarily established to integrate smart contracts, its compatibility extends to platforms and wallets originally built on Ethereum.

With BEP-20, the use of tokens like USDT becomes more efficient, minimizing transaction costs and times. Furthermore, these tokens remain supported on Ethereum-based platforms, offering flexibility and broadened utility.

Advantages:

1. Low Transaction Fees: Significantly cheaper transactions than Ethereum.

2. Fast Transactions: Speedy processing times.

3. Compatibility: Compatible with Ethereum Virtual Machine (EVM).

4. Backing by Binance: Supported and promoted by one of the largest cryptocurrency exchanges.

Disadvantages:

1. Centralization Concerns: Binance holds a significant influence over BSC, leading to centralization worries.

2. Younger Ecosystem: Though rapidly growing, it's still newer and less established than Ethereum.

TRC-20 Token Standard

TRC-20 is a standard for tokens on the TRON blockchain, defining their issuance, transfer, and other rules. Much like Ethereum's ERC-20 tokens, TRC-20 tokens offer speedy and secure transactions on the TRON network, playing pivotal roles in various TRON dApps, spanning gaming, finance, social media, and beyond.

Born as a streamlined version of Ethereum, the TRON network boasts quicker transaction speeds and reduced fees. As a public blockchain, anyone can issue tokens on TRON, adhering to the TRC-20 guidelines. These tokens can interact seamlessly with any entity or application within the TRON ecosystem.

Unlike Ethereum's proof-of-stake (PoS) consensus, TRON employs the more efficient delegated proof-of-stake (DPoS), marked by rapid transactions and cost-effectiveness, backed by numerous nodes and tailored innovations.

Though TRC-20 tokens, like USDT (TRC-20), are celebrated for their speed and affordability, they remain less sought-after compared to their Ethereum counterparts.

Advantages:

1. Low Fees: Cost-effective transactions compared to Ethereum.

2. High Throughput: Faster transaction speeds due to the DPoS consensus mechanism.

3. Growing Ecosystem: Rapidly expanding Dapp and token ecosystem.

Disadvantages:

1. Lesser Adoption: Compared to ERC-20 tokens, there's lesser market adoption for TRC-20 tokens.

2. Centralization Concerns: Some critiques point to a more centralized node/validation system compared to Ethereum.

SPL Token Standard

Solana is a high-performance blockchain platform designed to support decentralized apps and crypto projects at scale. The Solana protocol is known for its fast transaction speeds and low costs, making it an attractive platform for developers and projects.

SPL tokens are Solana's equivalent of Ethereum's ERC standards, like ERC-20 or ERC-721. SPL is a token standard on the Solana blockchain that allows for the creation, transfer, and management of fungible tokens on Solana. It's a way to standardize how tokens behave on the Solana network, ensuring consistency and interoperability.

Developers can use the SPL Token standard to create their own custom tokens on the Solana blockchain. Just like how Ethereum's ERC-20 standard led to a proliferation of various tokens and projects on the Ethereum network, the SPL token standard serves a similar function for the Solana ecosystem.

Advantages:

1. Ultra-fast: Solana's unique architecture allows for sub-second transaction times.

2. Low Fees: Even with high transaction volumes, fees remain low.

3. Scalability: Designed to handle a large number of transactions per second.

Disadvantages:

1. New Ecosystem: Being relatively newer, it's still building its ecosystem compared to Ethereum.

2. Adoption: Not as widely recognized or adopted as ERC-20 tokens yet.

3. Development Community: While growing, it's still smaller compared to Ethereum's.

What token standards does Unity Wallet currently support?

At the time of writing this piece, Unity Wallet supports ERC-20, BEP-20, TRC-20 & SPL token types with plans to integrate more in the nearest future.

Closing thoughts

Four key token standards - ERC-20, BEP-20, TRC-20, and SPL - drive blockchain's progress and the digital economy. They offer developers tools for smart contract tokens and give users diverse application options. Knowledge of these standards, whether on BSC, Ethereum, or TRON, is vital in the crypto realm. Each brings distinct benefits, and deep understanding can enhance blockchain and digital asset use. As crypto evolves, these standards will spur further innovation in the global digital landscape.