There are so many letters and numbers in the world of cryptocurrency, and the chaotic mess can be more than a bit confusing. Let’s sort out the jumbled wordplay by understanding each of the unique terms involved.
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The Ethereum Platform: The ERC Home
To dive into ERCs in any way, it is wise to first comprehend the platform on which they reside. Ethereum is a decentralized, online marketplace operating on blockchain technology that functions on smart contracts.
Those fancy terms largely boil down to, in very basic language, a space where peers can gather to securely and safely make transactions. Because of the science behind those processes, users are able to do so in an automated (smart contract) and secure (blockchain) process.
Within the Ethereum ecosystem continues a long line of advanced technology, each with unique purposes. One major component is the token.
By now, you’ve likely seen the letters “ERC” preceding a wide variety of numbers trailing along with them. These are token standards. Ethereum is full of these, and you will frequently see them discussed while researching crypto and its tech.
What Is an ERC?
In its simplest terms, ERC stands for Ethereum Request for Comments. It is a document that, those writing smart contracts (programmers), use to put the rules of each Ethereum-based token on, making them a fact the token must comply with at all times. In short, an ERC is a list of rules.
Why The Numbers?
To understand any ERC token standards, it is necessary to understand the naming conventions. We’ve defined ERC, but then what are the numbers that follow those three letters all about anyhow?
A token is defined by the contract’s address, which is the number. It also includes the number of tokens available to its credit. The number can also be used to provide more details to users. Details include the token’s name, its symbol, and the number of decimals.
What Is Contained in an ERC?
What is contained in these virtual “documents,” known as ERC token standards, are the rules that govern what a token can and cannot do. It is the standard by which the token must behave. The tokens on Ethereum’s platform must comply to all rules set forth within the document.
Once created by the smart contract programmers, these documents must be reviewed. In order to review an ERC, there is a process for that, too.
The Ethereum Improvement Proposal
The Ethereum Improvement Proposal (EIP) is the process in which the Ethereum community reviews the ERC documents. The EIP describes standards for the Ethereum’s platforms. Some of those platforms include core protocol specifications, client APIs, and contract standards.
Network upgrades are not a part of the EIP process. These are instead discussed separately in what is known as the “Ethereum Project Management Repository.” That makes it all clear, right? We get it, it is a lot of technical mumbo jumbo to some, but we’ll keep breaking it down, one component at a time.
A Chance to Revise
Through the EIP process, the community will review ERC documents (or go over the rules, so to speak). Once reviewed, the community may comment on the document, and allow the programmer the prepared the document a chance to make revisions.
To Become an ERC
Once a revision is submitted, the Ethereum community will accept or deny the programming document. Some of them are accepted after the EIP process. If it is, it is then passed on to be finalized. From there, Ethereum developers implement it.
Once the document is fully implemented on the platform, it is officially an ERC. An ERC is, thusly, first and EIP.
The ERC 1155 Token Standard
While there are many of these token standards across the Ethereum ecosystem, the ERC 1155 is typically discussed around the use of NFTs, or non fungible tokens. The ERC 1155 regulates the tokens used in NFT transactions.
As with all tokens of this kind, the goal of its existence is to make life easier for developers. The ERC itself contains the tool to do so.
How Was the ERC 1155 Created?
The ERC 1155 token standard, much like many others, technically builds on the backs of other, previously used tokens standards. For example, many are familiar with the often-discussed ERC 20.
ERC-20 and Fungible Tokens
The ERC 20 is rather the “OG” of the ERC world. It is the tech on which other token standards were able to be created. ERC 20 is the most popular and well-known of the ERC token standards on Ethereum.
It is such because it is the ERC-20 token standard that allows for a fungible token to operate. This ERC contains the rules pertaining to transfer and balance tracking functionalities.
The ERC-20 token is used in most initial coin offering (ICO) transactions. It also allows for the standard API within a smart contract to be implemented.
ERC-721 and Non Fungible Tokens
The ERC 721 came onto the scene to do the similar functions of the ERC 20, with one major difference. The ERC 721 is the standard that allows the NFT (or non fungible token) to operate. Just as the ERC 20 regulates the rules pertaining to, transferring, and balancing tracking for the fungible tokens, so too does the ERC 721 for the non fungible tokens.
An Improvement on the ERC 721
The ERC 1155 token standard can be considered a newer, faster, better ERC 721. But since ERC 721, 2.0 sounded a bit wordy, 1155 it is. (We’re kidding. The number functionality comes in due to the naming and the contract’s address.)
The ERC 1155 built on the tech of the ERC 721, making it improved, with wider capabilities.
It’s a Process
The work to make the ERC 1155 a possibility began on June 17, 2018 through the work of six developers. One year later, after the team took on more than 50 revisions and 400 comments, it was able to make the ERC 1155 token standard a reality, entering its final status phase to become an official Ethereum token standard.
The Improvements ERC 1155 Creates
So what is so great about the ERC 1155 and these amazing improvements. Many are boasting that the token standard will replace the ERC 721, becoming the new standard in NFT transactions. But, how is this new series of numbers going to improve upon the old?
Representation for the Masses
One unique feature the ERC 1155 offers (not previously available in the ERC 721) is the ability of its smart contract to represent multiple tokens at the same time. With the ERC 1155, developers are able to define and configure both fungibles and NFTs in a single smart contract.
ERC 1155 is the currently the only token standard that enables users to create ANY type of asset, from currency and real estate, to digital art and gaming items. In short, concept allows creators to mint an infinite number of both fungible and non-fungible tokens in a single-deployed smart contract.
In other words, the popularity of the ERC 1155 can largely be attributed to its versatility. Allowing a smart contract interface that accepts both non fungible token types and fungible tokens is a major breakthrough.
The world of ERC tokens is an imperfect one, and the developers know that. They accept that there is always room to improve, grow, and change, especially as the tech changes so rapidly, and more and more features can be made available with easier and more streamlined processes.
The entire process of the token becoming an ERC token standard is based on the idea of feedback and commenting. Programmers are able to make revisions, sometimes by the hundreds, to make sure the final result is useful and practical.
In the case of the ERC 1155, the token can do the same functions as the ERC 20 and the ERC 721, or even doing both type of functions at the same time. In doing so, the ERC 1155 also improved on that functionality. By making the process more efficient, as well as correcting obvious implementation errors, of its predecessors, the ERC 1155 has built upon, corrected, and improved the functions of the ERC 20 and ERC 712.
A Greener Option
Proponents of the ERC 1155 also like the “green” impact the token standard is having on the often-criticized NFT marketplace. The use of the token standard has allowed for an estimated 90 decrease in gas fees.
Gas fees, or the cost required to cover transaction costs, can be sky high when considering the massive amount of work required to create these digital assets and their blockchains. Streamlining the process cuts down on the impact on the environment, making it a greener choice. With gas costs down, and less of a carbon footprint being left behind, everyone wins.
Developers, of course, also don’t mind the extra green in the pockets, either. By cutting down on gas fees, there is less to spend generating the blockchain and continuing its required upkeep and growth.
Adoption on Ethereum
Another plus for the ERC 1155 token standard is that many of the programs offered on the Ethereum blockchain are beginning to adapt, accepting it as a standard. The number is also growing each day. Developers like saving money, the environment, time, and effort with the same contract.
Developers are quick to jump on the ERC 1155 bandwagon, as well, due to its functionality. A key feature of the token standard is that it allows for batch transfers. This means that multiple tokens can be included in a single transaction.
Using the same contract, this means there is nearly no limit to how much can be done in one swoop.
The developments happening on the Ethereum ecosystem are continually growing and changing. Somehow, all of that data and application status must be tracked. The ERC 115 helps here, too.
This token standard guaranteed log trace abilities. The ERC 1155 promises that event logs emitted by the smart contract will provide enough data to create an accurate record of all current token balances.
In other words, a database can easily be created to track indexed and categorized searches of every ERC 1155 token in a contract. This means a smart contract no longer has to maintain such indexing.
Besides having a very cool name, there is also a cool function that occurs thanks to the “Atomic Swap” available with the ERC 1155. In short, any amount of tokens can be swapped with “two simple steps.” This means that tokens can be exchanged across blockchains. Cryptocurrencies from different blockchains can be done directly with the two parties involved.
Atomic Swaps are controlled with smart contracts, but the ERC 1155 makes these exchanges of multiple tokens, from multiple blockchains, able to be done to multiple recipients. You can see how this capability reduces costs and efforts, combining efforts into a single smart contract. Fewer smart contracts mean fewer processes, and maximum benefits.
Semi Fungible Tokens
Some tokens are fungible, or having an equal value, easily divided, and swapped for one another. Some tokens are non fungible token types, meaning that the NFT cannot be replaced, there is not another of its kind, and there is only one true owner. But, what is a semi fungible token?
As the name may imply, these tokens take into consideration functions from both a fungible token and an non fungible token. Because the ERC 1155 can interact with either token, fungible or non fungible, it allows for traits of both token types to be combined into a new, unique token: the semi fungible token.
These semi fungible tokens are able to use the “best of both worlds” and are still very new to the scene. Generally speaking, the tokens begin as a fungible token, being able to be exchanged and used of its value. Once it has been used, it transfers more into the behaviors of an NFT, meaning the tracking, ownership, and accuracy still remain intact.
These semi fungible tokens, or SFTs, are able to be moved amongst the NFT circles, as well as the cryptocurrency platforms. In addition to being able to interact with multiple token types, the ERC 1155 also allows for a combination of the two to exist.
More To Come Ahead
While no one knows what the future holds, one thing is certain: the online universe created with the Ethereum platform is an ever-changing and always advancing space. New EIPs, ERCs and developer-created fixes are being created each and every day. And, that is what makes the space so exciting.
There are certainly techies that are just now getting into the game, that have so much to offer this vast world. Online exchanges of digital assets are still in the infancy stages, and, just like that adorable baby, are bound to grow and change. (They’re also bound to cause tears all night, make you want to rip your hair out, and the next minute love them.)
Staying attuned to these updates is a key component to understanding this tech, and with it platforms such as Ethereum. It was not so long ago that none of these advancements existed at all, so it is not so hard to understand that there is plenty more to come.