Ethereum-based tokens are the heart and soul of every single transaction made on the Ethereum blockchain network – and these are powered by a token or smart contract standard. These deterministic protocols come in all shapes and sizes, with some making minor improvements upon existing standards while others revolutionize an entire subset of token functionality.
At the forefront of these standards are the ERC-1155 standard and the ERC-827 standard – but how do these two differ? Keep reading to find out.
What’s A Token?
Tokens are programmable units representing value located on popular blockchains or digital ledgers. Standard tokens represent digital asset ownership and can be traded between token owners, while utility tokens represent the holder’s stake in a company or DAO. They function as a currency, a store of value, or as a permission-granting asset when voting within DAOs and larger decentralized blockchain operations.
That said, it’s important to note that when “tokens” are discussed in the crypto sphere, it could mean one of two things: any cryptocurrency besides Ethereum and Bitcoin or a digital asset that runs “on top of” an existing blockchain. The second definition is more common in DeFi spaces, with tokens like Aave, Chainlink, and Dai running on the Ethereum blockchain.
What Are ERC Token Standards?
ERC stands for “Ethereum Request for Comment” – the technical term for the “blueprint” that establishes conventions and standards within the Ethereum ecosystem. These conventions expand into every facet of Ethereum-based processes, including token standards, a subset of smart contract standards.
As the name suggests, “token standards” are the rules Ethereum-based tokens need to abide by. A reference implementation often accompanies these to give engineers an idea of how a token standard interacts with a blockchain platform. Because a smart contract standard is required to function predictably, different programs and dApps will need to select one that suits their specific needs.
Here’s an example of how a specific type of token standard may not work for every kind of dApp: Let’s say you’re trying to build an application on a blockchain platform that focuses on supporting financial transactions and token management. In that case, you’d need to work with an ERC-20 standard to get your project off the ground. However, this ERC-20 token standard won’t suit an online marketplace that focuses on trading digital assets and non-fungible tokens. So instead, you’d have to look into the ERC-721 standard.
There are four prevalent token standards: the ERC-20 standard, the ERC-721 standard, the ERC-777 standard, and the ERC-1155 standard.
If you want to learn more about different kinds of standards, check out a few of our other comparisons:
What Is The ERC-1155 Token Standard?
ERC-1155 is a multi-token standard that houses a unique smart contract function that groups several assets (NFTs, FTs, and SFTs) and stores them in the smallest possible form on contract. This level of flexibility is unlike the digital technologies of standard tokens, which need to separate every fungible token and non-fungible token into different smart contracts.
This standard interface makes every token transaction cheaper and more efficient, which can be an excellent fit for purchasing several items from blockchain stores, virtual worlds, and within games located on the blockchain network.
How It Works
The ERC-1155 token standard improves upon previous protocols by merging different types of assets (NFTs, FTs, and SFTs) into a single transaction. This standard can batch infinite tokens into a single contract, which cuts down on redundant bytecode, leading to a significant cost reduction in transactions. But what does that mean, exactly?
Imagine going to a clothing store and trying to buy a pair of jeans alongside a t-shirt, but the cashier states that valid transactions can’t have more than one item type. That means you’d have to spend twice the time ringing your items up, have two separate receipts, and the store itself would have to pay double the credit card fee per transaction. Tedious, right?
The above scenario represents how standard tokens process blocks of transactions. If the store used technology that functioned like the ERC-1155 standard, you’d be able to purchase everything in one go – resulting in an easier, more convenient shopping experience.
Functions And Features
ERC-1155 has a unique level of flexibility that simplifies financial transactions for blockchain stores. This type of token standard has various functions and features that set it apart from other standard tokens. Here are a few.
- Batch Transfer: This functions similarly to ERC-20 transfers, except it unifies several assets into a single token transaction.
- Batch Balance: ERC-1155 allows programs to utilize individual calls to fetch multiple balances in line with its streamlined transfer protocol.
- Batch Approval: Standard tokens require explicit approval for every transaction, but this function sets clearance for entire blocks of transactions.
- NFT Support: ERC-1155’s unique level of flexibility means that financial transactions containing only one in supply are treated as an NFT.
- Safe Transfer Rules: The protocol’s transaction processing components automatically revert or cancel any transfers that encounter errors or don’t get the proper authorization.
Advantages
Cost Reduction In Transactions
One of the biggest advantages token owners will experience is the reduced gas fees when transacting using this type of token. Transaction fees have long been the main deterrent for many users, with many creators refraining from minting their NFTs due to gas fees. But because the ERC-1155 protocol bathes bigger blocks of transactions together, gas fees are cut up to 90%.
Proper Security When Transferring
A standard blockchain service provider won’t allow transfers to go through without some level of authentication of a user’s digital identifier – and ERC-1155 does the same. So all valid transactions using this type of token go through several rounds of checking before they’re sent off.
This can be particularly helpful if a user accidentally mistypes the details of their digital certificate or wallet address on an asset exchange. With ERC-1155, you won’t lose any money in accidental or incorrect financial transactions.
Disadvantages
Harder To Track Ownership
The main drawback to this type of token standard is its lack of identity system architecture, which means token owners won’t be able to check with a certification authority to find out who owns a specific NFT. The protocol’s token management only records the most general details on its transaction log to save precious space.
What Is The ERC-827 Token Standard?
The ERC-827 standard is a token management protocol that addresses one of the most significant shortcomings of ERC-20. Namely, its tendency to burn currency if the receiving smart contract doesn’t support that specific type of token. This renders a token “stuck” in the recipient contract, unable to be retrieved and reused for other financial transactions.
This standard is similar to ERC-223, which aims to improve upon ERC-20, which cryptocurrency-backed stable coins run on. However, there is one marked difference between the two: the ERC-223 only communicates value, while the ERC-827 standard transmits value and data, which opens the door to more complex problem solving within the transaction log.
As a result, this standard will find its best use in crypto wallets.
How It Works
The ERC-827 token standard uses a recipient contract mechanism containing smart contract functions that carry QoL improvements. Specifically, it hosts transferAndCall, transferFromAndCall, and approveAndCall. On top of this, ERC-827 tokens include an additional data parameter to provide a more robust transaction log that allows third-party programs to spend currency.
Advantages
Considerable Level Of Flexibility
As we mentioned earlier, the ERC-827 standard sends metadata alongside each digital certificate during a transaction. That means the recipient smart contract can execute a long list of functions to address potential issues, making this deterministic protocol one of the most flexible ones currently available for use on popular blockchains.
Compatibility With ERC-20
Because this protocol is built to improve ERC-20’s existing smart contract activities, integrating it into existing blockchain operations is relatively seamless. As a result, developers won’t have to make significant adjustments to enjoy all this protocol’s improvements.
Disadvantages
Burgeoning Feature Set
Like most blockchain technology, the ERC-827 protocol has potential levels that remain mostly unexplored – but this is bound to improve over time. However, this may mean that blockchain projects that utilize this standard might have to adjust their code as the technology develops.
What Are The Major Differences Between ERC-1155 vs. ERC-827?
ERC-1155 primarily focuses on cost reduction and bolstering transfer efficiency, while the ERC-827 standard functions as a failsafe when something goes wrong in otherwise valid transactions. That said, they’re both beneficial standards that improve the daily experience of token management and financial transactions – they just address different issues.
So what types of implementations are best for each standard? ERC-1155 would be better suited to NFT and digital asset marketplaces, while ERC-827 would benefit crypto wallet projects.
Final Thoughts On ERC-1155 vs. ERC-827
ERC standards are necessary for the crypto community, but there’s one problem: they’re deterministic protocols that must fulfill specific requirements and nothing more. That means different projects will need various standards to address their needs – birthing the need for concrete distinctions between protocols.
So while ERC-115 and ERC-827 are both token standards that seek to mend a fundamental shortcoming of ERC-20, they’re actually very different.
Understanding how the two differ is essential when choosing a standard that suits your project, but that doesn’t mean you have to do it without help. Check out Tokenfy to find out how we can help you get your blockchain app up and running!
