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Tokens and NFTs: ERC-20, ERC-721, ERC-1155

THE SHORT ANSWER

A token represents an asset or right defined by a program. ERC-20 units are interchangeable; ERC-721 NFTs have distinct identifiers. Owning an NFT does not automatically transfer copyright in its associated image or item.

ERC-20 Tokens

ERC-20 defines an interface for fungible-token balances and transfers. Two units of the same token are interchangeable under its rules; two different ERC-20 tokens do not represent the same asset.

Key characteristics

  • A balance per address and common transfer functions.
  • Varying display precision: not every token uses 18 decimals.
  • Spending allowances that let a contract move an amount of tokens.
  • Possible extra rules: check fees, freezing, issuance and administration.

NFTs (ERC-721)

An NFT has a distinct identifier within its contract. Rights over an associated item or image depend on separate terms; they do not automatically follow token ownership.

Applications

  • Digital Art : An identifier can point to artwork; the licence and persistence of its file need checking.
  • Gaming : Game-related items whose usefulness depends on the service continuing to operate and its rules.
  • Certificates : An issuer can attest information; a token does not by itself make a diploma or document official.

Usage and Markets

Tokens and NFTs are traded on various specialized platforms.

  • Token exchanges

    Verify the network and contract address: a symbol or logo can be copied.

  • NFT marketplaces

    Check the collection, issuer, rights and sale terms. A listing or asking price is not proof of liquidity.

Different formats for different uses

Standard compliance facilitates technical interactions without guaranteeing their safety.

  • ERC-1155

    A single contract can manage multiple token types, fungible or non-fungible, with batch transfers.

  • Metadata and rights

    The associated image or document can be hosted elsewhere. Check persistence and permissions to change metadata.

A token is not a guarantee

Before using a token, check what it represents, its associated rights and contract permissions.

Sources and further reading

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