What is a token standard?

A token is a contract that keeps a list

An Ethereum token lives inside a smart contract. The contract keeps track of the tokens and how many each address holds.^4,5 Tokens can stand for almost anything: reputation points, a game character's skills, a share in a company, a dollar, or an ounce of gold.⁴

Why tokens need shared rules

Imagine every token used its own words for "send" and "balance". Every wallet would need new code for every token. Token standards solve this.¹ They define how tokens behave, so a new token works with existing wallets, exchanges and apps.¹

The ERC-20 standard puts it plainly. A standard interface lets any token be reused by other apps, from wallets to exchanges.⁵

A standard is a list of functions

A token standard is mostly a list. It names the functions a contract must have and what each one does.⁵ It also names events: signals the contract must give when something happens, such as a transfer.⁵ If a contract has all of these, it can be called by the standard's name, such as an ERC-20 token contract.⁴

Standards use a few words in capitals with exact meanings, borrowed from an internet rulebook called RFC 2119.^6,7

• MUST means the rule is an absolute requirement.⁷
• SHOULD means follow it, unless there is a good reason not to and you understand the effects.⁷
• MAY or OPTIONAL means the item is truly optional.⁷

Where standards come from

Ethereum's standards usually start as Ethereum Improvement Proposals, or EIPs.² An EIP is a design document. It gives information to the Ethereum community or describes a new feature.³ Its author is responsible for building agreement in the community.³

There are three types of EIP: Standards Track, Meta and Informational.³ Standards Track has four categories, and one of them is called ERC.^3,2 ERCs are standards for apps, including token standards.³ ERC stands for Ethereum Request for Comments.⁴ EIP-1's style rule says to write them as ERC-20, ERC-721, and so on.³

How finished is a standard?

Every EIP has a status. The main stages are Draft, Review, Last Call and Final.³ A Final EIP is the finished standard. After that, it should only change to fix mistakes or add clarifications.³ A proposal left inactive for six months or more is marked Stagnant.³

The five Ethereum standards in this module all show the status Final on their official pages.^5,6,8,9,10

A standard is not a safety check

A standard describes behaviour. It does not prove that a contract behaves well. ERC-4626 warns that a harmful contract could match the list of functions but not follow the rules.⁹