Top 3 ERC-20 vs ERC-721 vs ERC-1155: Key Differences

As blockchain technology matures, developers and users are increasingly relying on Ethereum’s standardized token protocols to build and interact with digital assets. Among these, ERC-20, ERC-721, and ERC-1155 are the most prominent token standards powering everything from cryptocurrencies to NFTs and blockchain-based games.

But what’s the difference between them, and when should you use each one?

This guide offers a detailed comparison of ERC-20, ERC-721, and ERC-1155, including use cases, advantages, limitations, and best practices.

What Are Ethereum Token Standards?

Ethereum token standards are sets of rules that smart contracts must follow to ensure compatibility across the Ethereum ecosystem. These rules govern how tokens behave — including ownership, transferability, and interoperability.

The most common Ethereum token standards include:

• ERC-20: Fungible tokens
• ERC-721: Non-fungible tokens (NFTs)
• ERC-1155: Multi-token standard (fungible + non-fungible)

What are ERC20 Tokens?

The ERC20 token standard is a technical specification used for smart contracts on the Ethereum blockchain that allows for the creation of fungible tokens. Drafted in 2015, it has become the most widely used standard for issuing tokens on Ethereum and provides interoperability across the growing decentralized finance (DeFi) ecosystem.

ERC20 allows developers to easily deploy customizable token contracts, which defines basic functions like total supply minting, token transfers between addresses, and event tracking for building mirrors and notifications into interfaces. Some key functions included name (), symbol (), decimals (), totalSupply (), balance (), transfer (), and transfer form ().

By implementing these functions, all ERC20 tokens can be used interchangeably by wallets, exchanges, and other applications. Anyone can send, receive, and interact with any ERC20 token in the same basic manner. This common standard helped spur immense growth and adoption across the Ethereum network.

Common use cases for ERC20 tokens

Common real-world uses of ERC20 tokens include fundraising through initial coin offerings (ICOs), creating digital payment options and assets for decentralized applications (DApps), building stable coins to facilitate crypto-based commerce, powering organizational governance models, and enabling new forms of crowdfunding and community investment.

One of the earliest and most well-known uses of the ERC20 standard was for issuing tokens on the Ethereum network during ICOs to raise capital for new blockchain projects. From 2017-2018, over $20 billion was collectively raised through ICOs launched using the ERC20 format on Ethereum. This validated the standard and network effects kicked in.

Advantages and limitations of ERC20 tokens

Many organizations now issue ERC20 governance tokens to decentralize decision-making. Holders can vote on proposals or even potentially earn dividends. Projects in creative industries are experimenting with new business models around ERC20 fan tokens, revenue sharing, or concert/event tickets. cross-chain stablecoins like DAI are also built as ERC20 tokens.

At the same time, scaling challenges and transaction congestion on Ethereum have prompted discussions about how to improve ERC20's flexibility to enable greater throughput at lower costs. Proposed upgrades like ERC777 and ERC1155 aim to expand the standard's functionality to include things like batches, approvals, and non-fungible tokens (NFTs).

While ERC20 helped propel Ethereum's early success, problems of scalability, interoperability, and limited use cases persist. New blockchains claim to offer technical advantages, but Ethereum still holds an enormous network effect advantage due to its vibrant DeFi ecosystem built on the back of the ERC20 standard. In summary, ERC20 opened the floodgates for tokenized assets and decentralized business models on the blockchain.

What are ERC721 Tokens?

ERC721 is a token well-known on the Ethereum blockchain that implements non-fungible tokens—that is, tokens that can be precise and no longer interchangeable with each other. This differs from cryptocurrencies like Bitcoin and Ether which can be fungible (every unit is similar to every other). The ERC721 fashionable presents a not-unusual set of guidelines for creating verifiably rare, one-of-a-type digital assets on Ethereum.

Each ERC721 token represents a unique, indivisible asset, in contrast to fungible tokens wherein each unit is equal. For example, 1 Bitcoin may be exchanged for any other 1 Bitcoin, however, 1 CryptoKitty NFT cat is distinct from every different CryptoKitty in life.

The ERC721 general additionally permits token metadata—records like a name, description, photo, attributes, etc.—to be stored without delay on the blockchain with the token. This on-chain metadata is what distinguishes non-fungible tokens and makes virtual shortage possible.

Unique characteristics of ERC721 tokens (non-fungibility)

There are a few key properties that ERC721 tokens possess that make them groundbreaking:

• Non-fungibility - Each token is unique instead of interchangeable, which provides verifiable digital scarcity.
• Proof of ownership - Tokens are tied to one owner at a time, with ownership recorded on the blockchain ledger.
• Metadata support - Rich data can be associated with each token, stored immutably on-chain.
• Transferability - Tokens are freely transferable to other accounts according to transfer logic coded into smart contracts.
• Interoperability - The standard makes tokens work across different platforms and wallets that support ERC721.

These attributes allow ERC721 tokens to represent digital collectibles, assets, certificates, rights, identities, and much more on the blockchain.

What are ERC-1155 Tokens?

ERC1155 tokens allow builders to create more than one token type in an unmarried smart agreement. This way you may have fungible tokens, non-fungible tokens, and semi-fungible tokens that everyone makes use of the same settlement code. ERC20 tokens are in simple terms fungible whilst ERC721 tokens are only non-fungible. ERC1155 bridges this hole in a widespread way.

Each token ID in an ERC1155 agreement represents a brand-new token type. The agreement defines the whole supply for each ID, and token balances are tracked in line with cope with, in line with ID. This allows a single settlement to symbolize a vast variety of tokens and token sorts.

Use Cases for ERC-1155

The flexibility of ERC1155 makes it beneficial for a lot of digital asset use instances:

• Gaming - ERC1155 is super for gaming belongings like characters, objects, skins, etc. Developers can represent both collectible NFT belongings and fungible consumable property like in-recreation forex in a single settlement.
• Digital Media - ERC1155 can be used to mint limited edition collectibles like artwork or music. The token ID should outline the rarity or edition number.
• Financial Instruments - ERC1155 permits tokenizing actual-world property like real estate or commodities on the blockchain. Semi-fungibility is useful for representing shares, bonds, or baskets of assets.
• Supply Chain - Tokenizing physical products as they pass via a delivery chain is a good shape for ERC1155 tokens with details like serial numbers encoded within the ID.

Advantages of ERC-1155

There are a few key advantages ERC1155 tokens have over ERC20 and ERC721:

• Batch transfers - ERC1155 supports batch transfers of multiple token types and IDs in one transaction. This further optimizes gas costs.
• Improved usability - End users only need to interact with one contract for different asset types. This provides a smoother user experience.
• Semi-fungibility - The ability to have tokens that are partly fungible unlocks entirely new use cases over just ERC20 or ERC721 alone.

Limitations of ERC-1155

However, there are some limitations to consider as well:

• Less battle-tested - ERC20 and ERC721 are time-tested standards while ERC1155 is newer and has seen less adoption so far.
• Increased complexity - Implementing ERC1155 can be more complex than a basic ERC20 or ERC721 contract since it combines features of both.
• Support- Minor token standards don't have as much support among wallets and exchanges yet compared to the major standards.
• Complicated- Metadata management is more complicated with multiple token types to track.

ERC1155 provides an exciting new token standard on Ethereum that unlocks new capabilities and use cases. While adoption is still early, ERC1155 could emerge as a go-to token standard for many types of digital assets thanks to its unique semi-fungible design. The potential gas savings and usability improvements make it appealing for asset-heavy applications like gaming and digital collectibles.

Comparing ERC-20, ERC-721, and ERC-1155 Tokens

Feature	ERC-20	ERC-721	ERC-1155
Token Type	Fungible	Non-fungible	Both fungible & non-fungible
Uniqueness	Tokens are identical	Each token is unique	Supports unique and identical
Transfer Function	transfer(address, amount)	safeTransferFrom(...)	safeBatchTransferFrom(...)
Batch Transfers	❌	❌	✅
Gas Efficiency	✅	❌	✅✅
Metadata Support	Limited	Rich metadata	Rich metadata (multi-type)
Ideal For	Currencies, DeFi, DAOs	NFTs, art, collectibles	Games, ticketing, marketplaces

In summary, ERC20 is best suited for fungible tokens, ERC721 supports non-fungible assets, while ERC1155 improves upon ERC721 by facilitating both fungible and non-fungible tokens on a single contract. The standards have continued to evolve and build upon each other by introducing new functionality over time to accommodate more complex use cases.

Conclusion 

The introduction of the ERC20, ERC721, and ERC1155 standards has been monumental in the development of tokenization on Ethereum. ERC20 set up a foundation for fungible tokens whilst ERC721 paved the manner for non-fungible virtual property. However, ERC1155 has furnished the maximum flexibility by permitting each sort of token to exist on a single contract.

As the requirements of the blockchain enterprise became greater nuanced, every new popular learned from the preceding ones to make bigger capability. Going forward, we will count on the similar evolvement of token standards to house more modern use cases and technologies. Interoperability among chains may also be a key awareness location. Overall, the ERC requirements have unleashed outstanding potential for innovation by way of developing lightweight APIs for fungible and non-fungible properties on Ethereum and past.

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