What is the difference between NFT/ERC-20/ERC-721 token standards? Comprehensive interpretation

NFTs, built on ERC-721, represent unique assets like art, while ERC-20 tokens are fungible, used for currencies and utility tokens on Ethereum.

Jun 16, 2025 at 12:07 am

In the world of cryptocurrencies and blockchain technology, token standards play a crucial role in defining how tokens are created, managed, and interacted with on the Ethereum blockchain. Among the most popular token standards are NFT, ERC-20, and ERC-721. Understanding the differences between these standards is essential for anyone looking to engage with or develop on the Ethereum ecosystem. This article will delve into the specifics of each standard, highlighting their unique features and use cases.

What is an NFT?

NFTs, or Non-Fungible Tokens, are a type of token that represents unique assets. Unlike cryptocurrencies like Bitcoin or Ethereum, which are fungible and can be exchanged on a one-to-one basis, NFTs are unique and cannot be exchanged on an equivalent basis. This uniqueness makes them perfect for representing digital art, collectibles, and other items where individuality is key.

NFTs are typically built on the ERC-721 standard, which we will discuss in more detail later. They are used to tokenize assets such as artwork, music, videos, and even virtual real estate. The key feature of an NFT is that each token has distinct information or attributes that make it different from any other token.

What is an ERC-20 Token?

ERC-20 is a technical standard used for smart contracts on the Ethereum blockchain for implementing tokens. It was proposed in November 2015 by Fabian Vogelsteller and is the most widely used standard for creating fungible tokens on the Ethereum network. ERC-20 tokens are interchangeable and can be used to represent a variety of assets, including currencies, utility tokens, and more.

The ERC-20 standard defines a set of rules that tokens must follow to ensure they can interact seamlessly with other smart contracts and decentralized applications (dApps) on the Ethereum network. These rules include functions for transferring tokens, checking balances, and approving token transfers to other addresses.

What is an ERC-721 Token?

ERC-721 is another token standard on the Ethereum blockchain, introduced in January 2018 by William Entriken, Dieter Shirley, Jacob Evans, and Nastassia Sachs. Unlike ERC-20, ERC-721 tokens are non-fungible, meaning each token is unique and cannot be exchanged on a one-to-one basis with another token of the same type. This standard is used to create NFTs, making it ideal for digital art, collectibles, and other unique assets.

The ERC-721 standard includes functions for transferring tokens, checking ownership, and approving token transfers. It also allows for the implementation of metadata, which can include details such as the name, description, and image of the token, making it easier to represent unique items.

Key Differences Between NFT, ERC-20, and ERC-721

The primary difference between NFT, ERC-20, and ERC-721 lies in their fungibility. ERC-20 tokens are fungible, meaning they can be exchanged on a one-to-one basis, similar to traditional currencies. This makes them suitable for use cases such as currencies, utility tokens, and governance tokens.

In contrast, NFTs and ERC-721 tokens are non-fungible, meaning each token is unique and cannot be exchanged on an equivalent basis. This uniqueness makes them ideal for representing digital art, collectibles, and other unique assets where individuality is important.

Another key difference is the technical implementation. ERC-20 tokens follow a set of standardized functions that allow them to interact seamlessly with other smart contracts and dApps on the Ethereum network. ERC-721 tokens, on the other hand, include additional functions and metadata to support the representation of unique items.

Use Cases for ERC-20 Tokens

ERC-20 tokens have a wide range of use cases due to their fungibility and standardized implementation. Some common use cases include:

• Cryptocurrencies: Many cryptocurrencies, such as DAI and USDC, are built on the ERC-20 standard. These tokens can be used for transactions, trading, and as a store of value.
• Utility Tokens: Many decentralized applications (dApps) use ERC-20 tokens to incentivize users to participate in their ecosystems. For example, tokens might be used to pay for services within a dApp or to reward users for contributing to the network.
• Governance Tokens: Some projects use ERC-20 tokens to give holders voting rights in the governance of the project. This allows token holders to have a say in the direction and development of the project.

Use Cases for ERC-721 Tokens and NFTs

ERC-721 tokens and NFTs have become popular for representing unique assets. Some common use cases include:

• Digital Art: Artists can tokenize their work as NFTs, allowing them to sell and trade their art on the blockchain. This provides a new way for artists to monetize their work and for collectors to own unique pieces.
• Collectibles: NFTs can be used to represent collectible items, such as trading cards, virtual pets, and in-game items. These collectibles can be bought, sold, and traded on NFT marketplaces.
• Virtual Real Estate: Some platforms allow users to buy, sell, and trade virtual land and properties as NFTs. This creates a new market for virtual real estate and allows users to own and monetize virtual spaces.

How to Create an ERC-20 Token

Creating an ERC-20 token involves writing a smart contract that adheres to the ERC-20 standard. Here's a step-by-step guide on how to do it:

• Choose a Development Environment: You can use tools like Truffle, Remix, or Hardhat to develop your smart contract. For this example, we'll use Remix.
• Write the Smart Contract: Open Remix and create a new file. Copy and paste the following code into the file:

pragma solidity ^0.8.0;
import "https://github.com/OpenZeppelin/openzeppelin-contracts/blob/master/contracts/token/ERC20/ERC20.sol";
contract MyToken is ERC20 {
constructor(uint256 initialSupply) ERC20("MyToken", "MTK") {
    _mint(msg.sender, initialSupply);
}
}

• Compile the Contract: Click on the "Solidity Compiler" tab in Remix and compile the contract.
• Deploy the Contract: Go to the "Deploy & Run Transactions" tab, select the "Injected Web3" environment, and click "Deploy". This will deploy the contract to the Ethereum network.
• Interact with the Token: Once deployed, you can interact with the token using the functions provided by the ERC-20 standard, such as transferring tokens and checking balances.

How to Create an ERC-721 Token

Creating an ERC-721 token involves writing a smart contract that adheres to the ERC-721 standard. Here's a step-by-step guide on how to do it:

• Choose a Development Environment: You can use tools like Truffle, Remix, or Hardhat to develop your smart contract. For this example, we'll use Remix.
• Write the Smart Contract: Open Remix and create a new file. Copy and paste the following code into the file:

pragma solidity ^0.8.0;
import "https://github.com/OpenZeppelin/openzeppelin-contracts/blob/master/contracts/token/ERC721/ERC721.sol";
contract MyNFT is ERC721 {
constructor() ERC721("MyNFT", "MNFT") {}

function mintNFT(address recipient, uint256 tokenId) public {
    _mint(recipient, tokenId);
}
}

• Compile the Contract: Click on the "Solidity Compiler" tab in Remix and compile the contract.
• Deploy the Contract: Go to the "Deploy & Run Transactions" tab, select the "Injected Web3" environment, and click "Deploy". This will deploy the contract to the Ethereum network.
• Interact with the Token: Once deployed, you can interact with the token using the functions provided by the ERC-721 standard, such as minting new tokens and transferring ownership.

Conclusion

Understanding the differences between NFT, ERC-20, and ERC-721 token standards is crucial for anyone involved in the cryptocurrency and blockchain space. ERC-20 tokens are fungible and widely used for currencies, utility tokens, and governance tokens, while NFTs and ERC-721 tokens are non-fungible and ideal for representing unique assets such as digital art and collectibles. By following the step-by-step guides provided, you can create your own ERC-20 and ERC-721 tokens and explore the vast possibilities offered by these token standards.

Frequently Asked Questions

Q: Can ERC-20 tokens be used to represent NFTs?

A: No, ERC-20 tokens are fungible and cannot be used to represent NFTs. NFTs require the ERC-721 standard, which supports the creation of unique tokens.

Q: Are there other token standards besides ERC-20 and ERC-721?

A: Yes, there are several other token standards on the Ethereum network, including ERC-1155, which allows for the creation of both fungible and non-fungible tokens within the same contract.

Q: Can I convert an ERC-20 token to an ERC-721 token?

A: No, ERC-20 and ERC-721 tokens are fundamentally different and cannot be converted from one standard to another. You would need to create a new token following the desired standard.

Q: How can I ensure the security of my token smart contracts?

A: To ensure the security of your token smart contracts, you should conduct thorough testing, use established libraries like OpenZeppelin, and consider having your contract audited by a professional security firm.