Most cryptocurrencies don’t have their own blockchain and run on the Ethereum network instead. They do this using ERC-20 tokens.
Ethereum is not just a blockchain, like Bitcoin, it is a platform. This means Dapps can be built on it and other tokens can run on it. Some tokens, like Binance Coin are set to remain ERC-20 tokens whereas other cryptocurrencies see them as a stepping stone to their own blockchains.
ERC-20 tokens are the most commonly used tokens on the Ethereum network. They are designed to be used for paying for functions and are known as utility tokens. They can also be used to pay for goods and services.
These tokens are:
💻 - Fungible - The code of each token is the same as any other although transactions histories can be used to identify and segregate tokens.
🛫 - Transferable - They can be sent from one address to another.
⛏️ - Fixed supply - A fixed number of tokens must be created so that developers cannot issue more tokens and raise the supply.
Did you know?
EOS, Tron and VeChain were all originally issued as ERC-20 tokens and have now converted to their respective mainnets.
More than 300 cryptocurrencies are based on the ERC-20 standard and run on the Ethereum network. Here are some:
💱 - Binance Coin - The native token on the crypto exchange Binance. It is used to pay for trading fees. Binance does a coin burn every quarter to reduce the supply.
Read more about Binance Coin Binance Coin.
💳 - OmiseGO - A decentralized network offering a payments solution targeted at banks and other financial institutions. Based on Ethereum, it uses the plasma protocol to make the network run quickly.
Read more about OmiseGO here.
📝 - 0x - An open protocol for decentralized exchanges. Trades are made by a system of smart contracts which Dapps can connect to. This provides them with liquidity.
Did you know?
OmiseGO and Vitalik Buterin, co-founder of Ethereum, donated $1 million to a refugee scheme in Uganda in March, 2018.
⚠️ - Low-throughput - The Ethereum network has been clogged up when Dapps have experienced high demand, such as CryptoKitties. When this happens, the network slows down and transactions become more expensive.
🐢 - Slow transactions - The block time is around 14 seconds, so transactions can take up to a minute to process. This may be adequate for some uses or too slow for others.
⏲️ - Ether - When transactions are made, a second cryptocurrency, called Ether, is needed to pay for transaction fees. This can add both time and cost, as it can result in dust on different platforms.
Other Ethereum standards have been created for different reasons. Here are some, in various stages of development:
ERC-721 - These tokens are non-fungible. Each token is unique and has its own code which has given rise to crypto collectibles.
ERC-1400 - These are for security tokens so the tokens can be sold as securities. This requires more control over who can access the coins and introduces know-your-customer protocols.
ERC-223 - When you make a transaction, fees are currently paid in Ether. This standard allows for the transaction fees to be paid using the tokens involved. This means a transfer of Augur would be paid in Augur tokens, with the ticker symbol REP.
ERC-777 - It aims to be an improvement on the ERC-20 standard by lowering overheads and adding new features. It is backwards-compatible which means it might be more widely adopted.
Every blockchain platform is being hyped as the next “Ethereum Killer” but Ethereum has managed to keep its place just behind Bitcoin. ERC-20 tokens are widely used and their traction will continue as long as Ethereum maintains its status. If anything, their biggest threat is from the enemy within: new Ethereum standards. When it comes to natural selection, they’ll need to be the fittest to survive.