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Article: What are the major token types on each chain?

Published on: 1/10/2024

What are the major token types on each chain?

What are the major token types on each chain and ecosystem?

The types, standards and implementations of different digital assets have proliferated rapidly in the past few years. NFTs, DeFi tokens, social tokens, bonding curve assets are some of the most talked about categories, but there are many edge cases, or situations where tokens straddle lines. While some token standards are fairly straightforward to understand, others are more complex, and it can also be challenging to understand how different types of tokens compare across different chains, where they are analogous, and where they’re not.

Understanding the complexity of different token types is important for anyone building a token focused application or service, especially if they’re looking to serve users on multiple chains. Being able to provide a consistent experience no-matter the underlying ecosystem is important for multiple use cases, including crypto wallets, marketplaces, trading applications, analytics tools, web3 games, tax software, and more. 

In this article, we’re going to cover the major token types on the major blockchain ecosystems, their typical functionality and use cases, and compare and contrast between each of them. There are other types beyond what are described here, but the ones in this article are the most relevant for developers building NFT or digital token / asset focused applications and wallets. We’ve also focused on the top 3 digital asset tokens by volume (as of early 2024) – EVM, Solana and Bitcoin.

For a quick overview, you can also refer to this chart for the major types by ecosystem:

Broadly speaking, tokens differ by their degree of fungibility - how interchangeable they are with other tokens of the same standard and type. Each ecosystem has slightly differing implementations, but comparable versions exist across most of them.

Fungible Tokens

Fungible Tokens are those where any given token of a specific standard and type is identical to any other - a balance of X tokens in one wallet is for all intents and purposes the same as a balance of Y tokens in another wallet.

How Fungible Tokens on EVM chains work

The most prevalent fungible token standard in the EVM ecosystem (Ethereum, and the blockchains that also utilize the Ethereum Virtual Machine) is ERC20. At its core, ERC20 is a technical standard used for creating and issuing smart contracts on the EVM blockchains, defining the set of rules that a token must follow, ensuring compatibility with the broader network. Key characteristics of ERC20 tokens include:

  • Uniformity: Ensures all tokens share a common set of features and behaviors, making them easily exchangeable and programmable across various applications and services.
  • Functions and Events: ERC20 includes a set of mandatory functions and events. (e.g., for checking the total supply, specific balances, transferring tokens, and approving interactions)
  • Interoperability: Due to standardization, ERC20 tokens can interact seamlessly with exchanges, wallets, and other smart contracts.

Because of their versatility and the widespread acceptance of the standard, ERC20s have many different use cases, including:

  • Trading: ERC20 tokens are commonly listed on various crypto exchanges, enabling trading and liquidity
  • Governance in DeFi Projects: They often act as governance tokens, most commonly giving holders voting rights in certain DeFi projects
  • Utility Tokens in dApps: Used as utility tokens within decentralized applications for accessing specific services or features
  • Staking and Yield Farming: Leveraged in staking and yield farming protocols to earn rewards and participate in DeFi ecosystems
  • Payment for Services: Some businesses accept ERC20 tokens as payment for goods or services
  • Collateral in DeFi Loans: When used as collateral in decentralized lending platforms.
  • Reward Systems: Implemented as part of reward or loyalty programs by various organizations.
  • Cross-chain Interactions: Facilitating cross-chain transactions and interoperability within the broader blockchain ecosystem.

How Fungible Tokens work on Solana

Solana's account model differs from EVM in that it treats accounts as stateful objects, each with its own storage space and data. Unlike EVM, where state is spread across various smart contracts, Solana's model encapsulates both the code and state of an account in one place. This approach can allow for more efficient and parallel processing of transactions, as each account's state can be modified independently. This model also enables richer on-chain data storage directly within an account, facilitating complex operations and interactions in a single transaction. For EVM developers, it's a shift from a balance-centric view to a more holistic account-state perspective.

Most tokens utilize the Metaplex standard on Solana. Metaplex takes advantage of Solana blockchain's account model, where NFTs and other tokens are represented as unique account states, not just token balances. Unsurprisingly, a format known as “Fungible” is the main type of fungible token on the Metaplex standard. Fungible tokens are simple SPL tokens with limited metadata, primarily used for currencies or utility tokens like USDC, GBTC, and RAY. They have a standard schema including basic fields like name, symbol, and an image URL.

How Fungible Tokens work on Bitcoin (BRC20s)

Despite Bitcoin being the original blockchain, the notion of distinct token types on Bitcoin is a relatively new phenomenon, sparked in part by the rise of Ordinals during 2023. As of early 2024, the closest analogy to fully fungible tokens on Bitcoin is the BRC20 standard. BRC20 leverages the ordinals protocol to support the creation and transfer of fungible tokens. Unlike EVM’s ERC20 or other similar standards, which rely on smart contracts, BRC20 uses ordinal inscriptions. These inscriptions enable data embedding onto satoshi tokens (using JSON inscriptions to program satoshis), making each inscribed satoshi (ordinal) unique and non fungible in nature, albeit with limitations compared to the versatility of smart contracts.

While this approach aligns with the fundamental nature of the Bitcoin blockchain, it introduces certain constraints. For example, the absence of smart contract functionality limits the scope of automation, security enhancements, and complex asset management that are achievable with ERC20s or other types on other networks. Additionally, the reliance on the Bitcoin blockchain subjects BRC-20 tokens to inherent network limitations such as lower scalability and slower transaction speeds, especially as network congestion increases.

Despite these limitations, BRC20s present opportunities for innovation and novel use cases within the Bitcoin ecosystem. Their simplicity makes them accessible for a wide range of users. However, their utility is primarily confined to fungible asset tokenization, lacking the broader functionality offered by more complex token standards. The future of BRC20 tokens, while promising, is still in a nascent stage, and their evolution will be shaped by the dynamics of the broader blockchain industry.

Non-Fungible Tokens

The original, quintessential notion of an NFT is a single, non-fungible token, with a single copy. Here, many tokens may share the same smart contract or source, but they are each distinct with a single, unique copy.

What is the main Non-Fungible Standard on EVM?

ERC721, designed for non-fungible tokens (NFTs), assigns a unique identifier to each token, enabling the tracking and transfer of individual assets. This standard incorporates functions like safeTransferFrom and transferFrom, which require specifying the unique token ID for transactions, and includes features for token-specific metadata and optional token enumeration.

Most of the original, well known Ethereum collections (e.g., many of the major PFP collections like Azuki, Mutant Ape Yacht Club and Pudgy Penguin) are ERC721s. ERC721 contracts typically consist of basic on-chain metadata (e.g., the name and description of each token), along with a metadata pointer to off-chain content. Mostly commonly this is a json file (stored on IPFS or elsewhere) that includes specific traits or attributes, and also links to media (such as an image, video, 3d model, audio, or a combination). Indexers such as SimpleHash help collate all this information into one query-able object.

Non-Fungible Tokens on Solana

A format known as “NonFungible” is the main non-fungible (single copy) standard on Solana. These tokens are unique, with each token having its own distinct characteristics and identity. They are represented with rich metadata, which includes not just the basic information like name, symbol, and description, but also an image URI, animation URL, and an external URL that points to further details about the asset. Additionally, NonFungible tokens have an array of attributes, each with a trait type and value, adding to their uniqueness. These tokens also incorporate additional properties and files, like different media types, to fully represent the asset. This comprehensive metadata schema makes NonFungible tokens ideal for representing individual, one-of-a-kind items like digital art, collectibles, or other unique digital assets, each with their own story and identity. Other Solana NFTs that fall into this category include a standard called "NonFungibleEdition" (or FungibleEdition - which is a token originally printed by a master account. The presence of the "Master Edition" serves as the original proof of the token, and allows it to be recreated. This category also includes most compressed NFTs (cNFTs) and programmable NFTs (pNFTs).

Preview image for a Claynosaurz - an example of a Solana programmable NonFungible token:

Non-Fungible Tokens on Bitcoin

The predominant method for handling NFTs on the Bitcoin blockchain is referred to as Ordinals. This protocol assigns a distinct identifier to each satoshi (sat) on the Bitcoin network, enabling transactions that include metadata. This capability represents a significant advancement, as it introduces a functionality that was previously unattainable on Bitcoin.

What is a satoshi?

A satoshi, often abbreviated as "sat," is the smallest unit of the Bitcoin cryptocurrency. It is named after Satoshi Nakamoto, the pseudonymous creator(s) of Bitcoin. One satoshi is equal to one hundred millionth of a single Bitcoin, or 0.00000001 BTC. This small unit allows for transactions involving very small amounts of Bitcoin, providing flexibility and precision in Bitcoin trading and transactions. The use of satoshis is particularly useful given the high value of a single Bitcoin; it allows for more granular and accessible transactions in the cryptocurrency.

The ordinals system unlocked the ability to differentiate one satoshi from another and therefore inscribe NFTs directly on a Bitcoin blockchain. Utilizing a logical ordering system, each satoshi is assigned a distinct number, enabling the inscription of arbitrary data, such as images or text, onto these units. This method diverges significantly from traditional blockchain practices, particularly those seen in smart contract-based networks like Ethereum. Ordinals essentially transform each inscribed satoshi into a unique digital artifact, akin to non-fungible tokens (NFTs), but they are distinct in that they are inscribed directly onto the Bitcoin blockchain. This direct inscription on satoshis leverages Bitcoin's robust features like immutability, security, and decentralized nature.

To recap: Bitcoin Ordinal NFTs act as non-fungible tokens on Bitcoin, whereas BRC20s are a specific approach to using Ordinals, aiming to replicate more of the fungible characteristics of similar tokens on other platforms.

Preview image for a Bitcoin Puppet - an example of a Bitcoin Ordinal NFT:

Semi-Fungible Tokens

As NFTs and different forms of token applications proliferated, new use cases required new standards. Specifically, tokens that act like non-fungibles, but with the ability to generate multiple copies.

How do Semi-Fungible Tokens work on EVM?

On EVM, the ERC1155 standard enables semi-fungibles. ERC1155 is a newer Ethereum token standard that represents an evolution from ERC721, offering increased flexibility and efficiency. Key differences include:

  • Multi-Token Standard: ERC1155 allows for both fungible and non-fungible tokens (like ERC721) in the same contract. This multi-token approach simplifies the management of diverse types of tokens within a single smart contract. ERC721 on the other hand is limited to handling individual non-fungible tokens only, each with a unique identifier.
  • Batch Transfers: ERC1155 enables batch sending of multiple types of tokens in a single transaction, significantly reducing transaction costs and improving efficiency, especially useful in gaming and NFT platforms where multiple types of assets are often transferred simultaneously. ERC721 requires separate transactions for each token transfer, leading to higher costs and slower operations when dealing with multiple tokens.
  • Gas Efficiency: 1155 tends to be more gas efficient due to its ability to handle batch transfers, whereas 721 is less gas efficient when deploying multiple NFTs or transferring multiple tokens.

ERC1155 also offers a richer set of functionalities including safe batch transfers, and the ability to interact with multiple tokens types at once. As such, the 1155 standard made a number of NFT / token use cases easier on EVM chains, including: 

  • Gaming: making it easier for games to include multiple types of in-game items (both fungible like coins, and non-fungible like unique swords or characters).
  • DeFi Platforms: facilitates the creation of complex financial products that include various types of tokens.
  • Art and Collectibles: artists can issue numbered editions (limited or open) of a given artwork within the same contract.
  • Asset Bundling: more hypothetical, but could allow for the bundling of different types of assets into a single transaction, useful in scenarios like real estate where multiple property rights could be bundled.

How do Semi-Fungible tokens work on Solana?

Not to be confused with “Fungible” tokens, on Solana “FungibleAssets”, sometimes directly referred to as "semi-fungible tokens," offer more extensive metadata and are often used in gaming contexts to represent items like swords or pieces of wood. These tokens can have attributes such as images, animation URLs, external URLs, and an array of traits defining their characteristics. This makes them suitable for representing items that are fungible yet have distinct attributes, setting them apart from standard fungible tokens.

Other token types

Like the broader crypto landscape, digital token standards are moving quickly, with developers and builders experimenting and deploying new approaches almost continuously. Here are a few other major standards on the horizon:

  • ERC6551 (EVM): ERC6551 (sometimes known as the token-bound account standard) transforms NFTs into wallets themselves, allowing them to hold and manage digital assets. This opens up practical applications across various sectors. In gaming, it lets avatars own in-game items. DAOs can use it for managing memberships and distributing rewards. Social networks can leverage it for enhanced user profiles with asset management. Essentially, ERC6551 extends NFT utility from mere collectibles to active, transaction-capable entities in the digital space. The hope is that this standard will act as the modular building block for many different kinds of new web3 apps

  • Token-2022 (Solana): Token-2022 (sometimes shortened to token22) is a newer token program on Solana, designed as a superset of the existing Token Program. It's developed to add new functionalities for both fungible and non-fungible tokens while maintaining backward compatibility with the original Token Program. For Solana developers, Token-2022 is crucial because it addresses the need for more diverse token features without disrupting the existing ecosystem. It supports the same instruction layouts as the original Token Program but extends functionality with new instructions and fields added as extensions. These extensions include features like confidential transfers, transfer fees, and interest-bearing tokens, allowing for more complex and varied token types. Token-2022 represents an evolution in Solana's token handling, offering enhanced capabilities and flexibility for developers creating sophisticated token-based applications.
  • STAMPS (Bitcoin): STAMPS is a method to write base64-encoded data directly onto the Bitcoin blockchain, using the Counterparty protocol. This approach ensures that the image data becomes a permanent and immutable part of the blockchain, unalterable and always retrievable (contrasted with many NFT types on other chains, which often rely on external metadata and media). STAMPS are stored within the Bitcoin transaction outputs, making them resistant to data pruning. The process involves encoding an image into a base64 string, appending it to a "STAMP:" prefix in a transaction's description key, and broadcasting it via Counterparty. This method uses a smaller canvas, typically 24x24 pixels, suitable for pixel art, with images formatted in JPG, PNG, GIF, or WebP. Each Bitcoin Stamp is uniquely identified and timestamped, ensuring chronological organization. The advantages of this approach are a more secure and permanent solution for digital art storage.

Correctly utilizing different token types

Correctly indexing, parsing and keeping up with every major standard across different chain ecosystems is a challenge. For developers building NFT and token-focused applications, SimpleHash offers a set of API and data streams to make this easy.  The SimpleHash platform supports all of the major standards listed in this article, and automatically ingests each type, while providing convenient tooling to query and make use of each token format. Developers can also query the real-time balances, metadata, and associated market data of the tokens held by any wallet. To dive deeper and start building, the SimpleHash API docs feature the reference models, along with how to get up and running.

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