ERCs are attempts to formalise specific blockchain use cases, using Ethereum Smart Contracts. Notable examples of these standards are fungible (ERC-20) and non-fungible tokens (ERC-721). Through this short article I will explain the difference between the main ERC tokens and why these standards are useful.
ERC stands for Ethereum Request for Comment, and is a way of standardising common types of tokens. This means if many people want the same functionalities from a token or smart contract they can follow a tried and tested template.
The best way to think of ERCs, is that they are attempts at standardising various tasks for tokens on the Ethereum network. This helps as these templates are a great starting point when creating your own smart contracts and tokens within the Ethereum ecosystem.
The first ERC variation we will discuss is the ERC-20, this is the most commonly used Ethereum token template and it is for fungible tokens, or 1 to 1 tradable tokens. This means if you create 1000 tokens using the ERC-20 template they will all have the same value and be tradable for each other, like 1 USD being trade-able for another 1 USD.
Tokens created using ERC-721 are Non-Fungible Tokens (NFTs), each being a unique item. These tokens are very useful for representing a digital copy of real world items, as they can be easily verified and cannot be copied. They are also useful for asset management systems, property titles, certificates, in-game-items and more.
ERC-725 & others
ERC-725 is emerging as a standard for identity tokens on the Ethereum network. This standardisation is playing a large part in the work deciding how Self-Sovereign Identity will function.
Some standards are an addition or compliment to others, rather than a unique case solver, for example ERC-621 acts as a supplement to ERC-20. ERC-621 has increaseSupply and decreaseSupply, allowing the creator to change the supply after the token contract has been created, an action not available with an ERC-20 contract.
ERC-884 is being used to tokenise stock, allowing users to maintain corporate share registries. ERC-1155 is a proposed standard for the managing of multiple token types from one contract, allowing people who use it to manage fungible and non-fungible tokens all from the same contract.
When researching these areas the reader may also come across EIPs, these Ethereum Improvement Proposals are ways of proposing upgrades to the Ethereum network, and hope to incrementally improve the network as a whole.