Why token standards are crucial for blockchain

Token standards represent the common language of the blockchain. Without them, each project would have to reinvent the wheel, creating incompatibilities and confusion in the ecosystem. What are the standards of Ethereum and other networks for? Essentially, they provide a blueprint that allows developers to build interoperable tokens that are easy to integrate into wallets, exchanges, and decentralized applications.

Think of standards as the building blocks of a structure. When everyone uses the same type of block, the entire building is more stable and functional. The same principle applies to blockchain: standards ensure that tokens can move smoothly from one application to another without technical issues.

How standards enable interoperability

The true utility of token standards emerges when you try to use one of your digital assets. Suppose you own ERC-20 tokens on Ethereum: thanks to the standard, these tokens work automatically on MetaMask, Ledger, Uniswap, and thousands of other applications without the need for special configurations. This universal compatibility would be impossible without common rules.

The standards define:

• The basic functions that every token must implement
• How to transfer tokens between addresses
• How to track user balances
• How to authorize expenses

The main standards and their applications

ERC-20 on Ethereum: The standard that made DeFi possible. Practically every token on the Ethereum network follows these specifications, enabling a seamless ecosystem of applications, from DEXs to lending protocols. Without ERC-20, the entire decentralized finance of Ethereum would not exist.

ERC-721 for unique assets: While ERC-20 represents interchangeable tokens like money, ERC-721 introduces the concept of uniqueness. Each NFT is distinct from the others, allowing for the representation of ownership of digital art, collectibles, and rare virtual assets. This standard has opened up an entirely new market for digital assets.

BEP-20 on BNB Smart Chain: BNB Chain's answer to Ethereum standards. It works similarly to ERC-20, but with much lower fees and higher transaction speeds. This has attracted millions of users looking for a cost-effective alternative to Ethereum.

SPL on Solana: Solana uses its token standard system, ensuring that every asset on the network is consistent and interoperable with Solana's smart contracts and wallets. The native token SOL itself follows these standards, as do all other tokens in the ecosystem.

The hidden value of standards

What are the standards of Ethereum and other blockchains really for? They are not just boring technical specifications. They represent trust, predictability, and security. When a developer creates a new wallet or a DeFi application, they know exactly how to handle tokens without surprises. Users know that their digital assets will work consistently everywhere.

Standards create network effects: the more applications follow the same standard, the more users will adopt that standard, and consequently, more developers will build on it. This virtuous circle has made Ethereum the undisputed leader of DeFi.

Understanding these standards is essential for anyone looking to operate in decentralized finance or manage digital assets. They are not just simple bureaucratic rules, but the foundation on which the entire modern blockchain infrastructure rests.