KEYTAKEAWAYS
- Token Standards act as shared blueprints that allow crypto assets to function consistently across wallets, platforms, and smart contracts.
- Standards like ERC-20, BEP-20, ERC-721, and ERC-1155 support different asset types while enabling interoperability and developer efficiency.
- Wrapped tokens and bridges help overcome incompatibility between Token Standards, allowing assets to move across blockchain ecosystems.
CONTENT
Token Standards define how crypto tokens work, interact, and scale across blockchains, enabling interoperability, efficiency, and compatibility in DeFi and multi-chain ecosystems.
Despite the existence of thousands of cryptocurrencies, most of them are actually built on a surprisingly similar foundation. These shared blueprints are known as Token Standard, and they define the core functions and properties that blockchain tokens must follow.
A Token Standard specifies how a token behaves on-chain—how it can be transferred, how balances are checked, and how it interacts with other applications. Thanks to these shared rules, the crypto ecosystem is able to function smoothly even in a decentralized environment.
WHY ARE TOKEN STANDARDS IMPORTANT?
✅Interoperability
One of the most critical roles of a Token Standard is enabling interoperability. When tokens are created using the same Token Standard, they can seamlessly interact with existing platforms, wallets, and decentralized applications.
For example, ERC-20 tokens are interoperable with other products and services that follow the same Token Standard. This is why you can trade one ERC-20 token for another without needing custom infrastructure or special handling.
Without Token Standard, trading multiple cryptocurrencies would become significantly more complex. Each token might require its own dedicated wallet and unique logic, making it impossible to manage many different assets within a single wallet interface.
✅Compatibility
From a development perspective, Token Standard provide a compatible framework that allows developers to reuse existing components instead of rebuilding basic functionality from scratch.
By relying on a proven Token Standard, developers can save time on foundational features and focus more on experimentation, optimization, and innovation. This compatibility reduces development friction and helps new projects launch more efficiently.
✅Efficiency
Token Standard also improve efficiency at the smart contract level. Once a token is deployed according to a recognized standard, other smart contracts can easily monitor and interact with it.
Standards such as ERC-20 and BEP-20 include essential functions like address lookup and balance tracking. These built-in capabilities allow smart contracts to monitor token activity in a consistent and efficient manner.
In practice, developers can use standardized interfaces such as the Contract Application Binary Interface (ABI) to track ERC-20 token transfers and retrieve on-chain data, further streamlining integration across the ecosystem.
>>> More to read: What is Token Unlock in Crypto? A Complete Guide
COMMON TOKEN STANDARD IN CRYPTO & DEFI
In the cryptocurrency and DeFi ecosystem, Token Standard form the technical foundation that allows digital assets to function, circulate, and integrate across different platforms. Each Token Standard is designed for a specific blockchain environment and use case, shaping how tokens are issued, managed, and utilized on-chain.
📌 BEP-20
BEP-20 is the Token Standard used on the BNB Smart Chain (BSC). It was developed as a technical specification for BSC, enabling developers to issue a wide range of tokens, including pegged tokens, utility tokens, and stablecoins.
Compared with earlier standards, BEP-20 introduces additional management features such as blacklisting, minting, and the ability to pause token burning. These functions provide projects with greater operational flexibility and control.
The core functions of the BEP-20 Token Standard include:
- Total Supply: Defines the total number of tokens issued
- Balance Tracking: Allows querying token balances
- Transfer: Enables users to transfer token ownership
- Delegated Transfer: Allows smart contracts to transfer tokens on behalf of users
- Approval: Sets limits on how many tokens a smart contract can withdraw
- Allowance: Defines which external addresses are authorized to use tokens
These features make BEP-20 a highly practical and widely adopted Token Standard within the BSC ecosystem.
>>> Learn more: What is BEP-20 Token? A Comprehensive Guide
📌 ERC-20
In 2015, Fabian Vogelsteller proposed ERC-20, a Token Standard that later became the primary guideline for token creation on Ethereum. Today, most cryptocurrencies, staking tokens, and utility tokens on Ethereum are still built around this standard.
ERC-20 is a Token Standard designed for fungible assets, meaning each token unit is identical and interchangeable. For example, if you create 1,000 ERC-20 tokens, every unit has the same functionality and value.
While BEP-20 and ERC-20 are structurally very similar, they operate on different blockchain networks. ERC-20 is used on the Ethereum blockchain, whereas BEP-20 belongs to the BNB Smart Chain. This distinction is important when managing assets across chains.
>>> Learn more: Understanding ERC-20 | A Guide to ERC-20 Tokens
📌 ERC-721
Most non-fungible tokens (NFTs) on Ethereum are built using the ERC-721 Token Standard. Whether it is a limited-edition collectible or a Proof of Attendance Protocol (POAP), many NFTs share the same underlying blueprint.
What makes ERC-721 unique is its requirement that every token must have a globally unique token ID. This rule ensures that each asset is one of a kind, which is the defining characteristic of NFTs.
In terms of functionality, ERC-721 supports token transfers, balance tracking, total supply management, and—most importantly—guarantees the uniqueness of each token under this Token Standard.
📌 ERC-1155
As token use cases expanded, the industry began to demand a more flexible Token Standard capable of supporting multiple asset types. ERC-1155 was introduced to meet this need.
ERC-1155 is a multi-token Token Standard that allows developers to create different types of digital assets within a single smart contract. These assets can include both fungible tokens and NFTs.
One of the most notable advantages of ERC-1155 is its batch functionality, which includes:
- Batch Transfers: Transfer multiple asset types in a single transaction
- Batch Balance Queries: Retrieve balances for multiple assets at once
- Batch Approvals: Approve all tokens for use by a single address
- NFT Support: When the supply is set to 1, the token is treated as an NFT
These capabilities make ERC-1155 one of the most efficient and flexible Token Standard, particularly well suited for gaming, metaverse, and complex asset systems.
>>> More to read: What is a Token Generation Event (TGE)?
LIMITATIONS OF TOKEN STANDARD
While tokens created under the same Token Standard share consistent core functions and can easily interact with one another, this interoperability usually breaks down when tokens follow different standards. Given that the crypto industry is governed by multiple Token Standards, each with its own rules and design assumptions, it is not surprising that they are not always compatible.
In practice, this means tokens built on different Token Standards may not coexist on the same platform, nor be able to communicate or trade directly with one another. If you hold multiple cryptocurrencies, you have likely experienced this limitation firsthand—for example, the frustration of not being able to use BTC directly within the Ethereum ecosystem.
To address this incompatibility, the industry introduced a new type of token: wrapped tokens.
🔍 Wrapped Tokens
Wrapped tokens are cryptocurrencies that are pegged in value to another underlying asset. Typically, the original asset is locked into a digital reserve—often referred to as a wrapper—while a corresponding wrapped version is issued on a different blockchain.
This wrapped token functions as a representation, or “avatar,” of the original asset on another network. Through this mechanism, assets that were originally incompatible with a specific Token Standard can be used within ecosystems where they would otherwise be unavailable.
>>> Learn more: What Are Wrapped Tokens?
✏️ Summary
A Token Standard functions much like a blueprint for designing and issuing blockchain-based tokens. Today’s crypto industry relies on multiple Token Standards, each optimized for different networks and use cases.
At the same time, innovative solutions such as blockchain bridges and wrapped tokens have emerged to help mitigate incompatibility between different standards. Together, these tools allow assets to move more freely across ecosystems, reducing the friction caused by fragmented Token Standard and expanding how digital assets can be used..
