Educational Byte: What You Need To Know About Token Types

A “token” is usually defined as an internal or secondary asset in a network that has another native currency. An individual, company, or organization, or Autonomous Agent or smart contract creates them on top of an already-existing ledger, for several purposes. So, they need to respect the internal rules of that ledger. For instance, the popular stablecoin Tether (USDT) is a token that doesn’t have its own platform but works on several chains as a token —including Ethereum and TRON.

Maybe you’ve heard about ERC-20 tokens? Well, that only applies to Ethereum, but we can say that Tether is an ERC-20 token inside this platform. On TRON, it’s a TRC-20 token, but the difference isn’t that much for the final user —except for transaction fees, often higher in Ethereum.

What do these different token types do, anyway?

Tokens -20, -721, and more numbers

“ERC” stands for Ethereum Request for Comment, a protocol or system used by developers to propose improvements on that network. It was promptly adopted as the name of a new token standard, though —by adding it a number. A token standard is a set of parameters, features, or coding rules that every new asset in a certain ledger must follow to adapt to a specific function and be compatible.

ERC-20 tokens are, basically, fungible (like money) tokens. They can be transferred and have a supply higher than one. Outside Ethereum, other chains have adapted the name for identical or similar token standards. That’s how we got TRC-20 in TRON, BEP-20 in BNB Chain, BRC-20 in Bitcoin, and so on. On the other hand, some chains avoid the name and use something completely different, like SLP tokens in Solana. All of them are fungible, though (they were made to be equal to each other).

As you may imagine, Non-Fungible Tokens (NFTs) aren’t the “20 standard” type. They weren’t made to be indistinguishable, but to be unique, like artworks. Therefore, they’re often built with a different token standard. On Ethereum, that could be ERC-721 or ERC-1155 (which works for fungible tokens too). But we also have BEP-721 tokens in BNB Chain, TRC-721 in TRON, and CIP-25/68 in Cardano. Whichever the name, the results are collectibles or unique tokens.

Now, beyond fungible and non-fungible, there are other standards with different features in the middle, depending on the network. For instance, ERC-777 tokens are fungible, but deemed more efficient and compatible than ERC-20 tokens. ERC-4626 tokens are “tokenized vaults” that use ERC-20 tokens to represent shares of some other asset.

Despite all the numbers and potential standards, your wallet provider or specific platform will likely show you all the functions in a user-friendly manner, without technical terms.

Wrapped and Bridged Tokens

We can say that wrapped and bridged tokens have something like special gift wrappers to make them compatible with different blockchain networks. These tokens follow the same standard as other tokens (such as ERC-20) but they are also essentially a bridge between two chains, allowing you to use your favorite tokens on various platforms. However, they have some differences.

Wrapped Tokens are often similar to “stablecoins” in the sense that their value is pegged to another asset. However, they were built to work in a different ledger from the original. For instance, we have Wrapped Bitcoin (WBTC). Its value should always be the same as the original Bitcoin (BTC), but it’s designed to work on Ethereum-compatible networks. It’s a way to transfer bitcoins in other chains.

For their part, bridged tokens are assets that have been “moved” from one ledger to another using a cross-chain bridge. A cross-chain bridge is a technology or a platform that allows assets to be transferred securely and transparently between different ledgers. They lock the original assets on a contract or address and provide you with a native representation of them in the chain you selected.

For example, we have the Counterstake Bridge in Obyte to “import” (bridge) assets from other chains to be compatible with the Obyte wallet and ecosystem —and also the opposite. If you have ETH (or any other available asset) in the Ethereum network but you want to use it inside the Obyte ecosystem (e.g., to provide liquidity in a DEX), you can use Counterstake to exchange ETH on Ethereum for ETH on Obyte. Just with a few clicks.

Assets in Obyte

Unlike Ethereum and other chains, all assets in Obyte enjoy the same status, without complex standard types. They still could be configured to carry on different functions, but this will be much easier for developers, and even for average users too. Anyone can create their own custom tokens via the chatbot available in the wallet or using the Obyte Asset Registry, without coding. It’s just a matter of setting the supply, name, decimals, ticker (symbol), description, and issuer data.

Developers can also apply more advanced features for their tokens, just with a few lines of code. For instance, there are properties like “cosigned_by_definer” (for regulated environments), “is_private” (to make it a privacy coin), or “is_transferable” (to allow or ban user transfers). This way, all tokens are easier to create and handle, and there is no way these functions can go wrong.

NFTs are available too, just by configuring the supply of any token to 1 unit, or through the user-friendly marketplace CryptoThings. There are no more complex steps in Obyte!