Launching a blockchain project? One of the most important early decisions you’ll face is choosing the right token standard. It’s more than just a technical formality—it shapes how your token functions, who can use it, how it integrates with wallets, and whether it can scale across chains or meet legal requirements. With standards like ERC-20, ERC-721, ERC-1155, and ERC-1400 serving different purposes—from utility and governance to NFTs and regulated assets—understanding their differences is critical. This guide breaks down each standard, explores advanced token architectures, and highlights real-world case studies to help you make a confident, future-proof decision for your business.
What Are Token Standards—and Why They Matter Today
Token standards are like rulebooks for how digital tokens behave on a blockchain. They set the structure for how tokens are created, transferred, and interacted with. This ensures that tokens can seamlessly work across wallets, dApps, and exchanges without custom coding for each one.
Why ERC‑20 Became the Industry Benchmark
The ERC‑20 standard, introduced in 2017, laid the groundwork for thousands of fungible tokens. It gave developers a shared blueprint that wallets and platforms could easily support. As a result, it became the go-to model for ICOs and token launches—leading to over 40,000 ERC‑20 tokens deployed within its first year.
The Power of Interoperability
Token standards eliminate fragmentation by making assets universally compatible. When your token adheres to a standard, it’s much easier to list on exchanges, integrate with third-party tools, or be used in decentralized finance (DeFi) applications. Without a standard, a token risks becoming siloed and unsupported.
How Different Project Goals Map to Token Standards
Start With Your Token’s Purpose
Before picking a standard, define what you’re building. Are you enabling payments, issuing ownership, running a game economy, or managing community governance? Your answer determines everything from your smart contract features to how your token behaves in the real world.
ERC‑20: The Go-To for Utility and Payment Tokens
Token is used for transactions, rewards, or staking—such as in DeFi apps or SaaS platforms—ERC‑20 is often the best fit. It offers high liquidity, wallet support, and seamless exchange integration. It’s also commonly used in DAO governance where fungibility and transferability are critical.
ERC‑721 and ERC‑1155 for NFTs and Gaming Assets
For projects centered on uniqueness—like digital collectibles, artwork, or game items—ERC‑721 provides a reliable framework. If you need efficiency in minting batches of similar or mixed tokens, ERC‑1155 is more flexible. It supports both fungible and non-fungible tokens in one smart contract.
ERC‑1400 for Compliance-Driven Security Tokens
When legal oversight is essential—such as tokenizing equity or real estate—ERC‑1400 shines. It includes built-in features like transfer restrictions, partitioned ownership, and KYC integration. These tools help businesses stay compliant without building custom regulatory logic from scratch.
DAO and Governance Use Cases
Projects building DAOs typically rely on ERC‑20 tokens, but with additional voting logic or off-chain voting tools like Snapshot. These tokens often represent voting rights or membership and must support delegation, quorum, and flexible governance rules.
Adoption Numbers & Market Data by Token Standard
Token standards have become the backbone of Web3 economies, and the data behind their adoption reflects just how central they are to modern blockchain use cases. From fungible currencies to NFTs and upgradeable logic, each standard comes with its own scale of adoption and ecosystem maturity.
ERC‑20: The Widely Adopted Foundation for Fungible Tokens
By mid‑2017, Ethereum hosted more than 40,000 ERC‑20 token contracts, driven by the initial wave of ICOs. That momentum continued to build, and current estimates place the total number of ERC‑20 tokens at well over 450,000 deployed contracts. These tokens collectively enabled more than $4 billion in funding within just the first few years. ERC‑20 tokens benefit from maximum interoperability across wallets, exchanges, and DeFi protocols. For teams launching utility tokens, stablecoins, or DeFi governance assets, this standard continues to offer unmatched flexibility and infrastructure support.
ERC‑721: Multi‑Billion Dollar NFT Standard
Annual trading volume for ERC‑721 tokens surpassed $10 billion in 2025. A significant share—over 60%—originates from blockchain gaming use cases, including in-game collectibles, avatars, and virtual land. Gaming studios, NFT marketplaces, and RWA (real-world asset) tokenization projects favor ERC‑721 for its singularity, transparency, and ecosystem tooling. Despite newer standards like ERC‑1155 gaining momentum, ERC‑721 remains the most recognized format for unique assets.
Proxy-Based Contracts: Making Smart Contracts Upgradeable
Approximately 14% of Ethereum contracts use a proxy pattern for upgradeability. Among them, 32% are designed with updatable logic, enabling developers to introduce improvements or adjust contract behavior without deploying a new token contract. Proxy architectures are now commonly used in complex ecosystems such as DAOs, DeFi platforms, and asset management protocols. This model supports long-term growth while maintaining token continuity and user confidence.
Comparative Breakdown: What Each Standard Brings to the Table
ERC‑20 & Friends (BEP‑20, CW20, SPL)
Core Functions That Define ERC‑20
The ERC‑20 standard outlines six essential functions—totalSupply, balanceOf, transfer, transferFrom, approve, and allowance—along with three optional ones like name, symbol, and decimals. This structure ensures a consistent interface across all tokens, making them easily recognizable by wallets, exchanges, and DeFi platforms. Other chains like BNB Chain (BEP‑20), Cosmos (CW20), and Solana (SPL) offer similar standards tailored to their respective environments.
Why Developers Love It
ERC‑20 tokens are battle-tested. Their widespread adoption means better documentation, community support, and compatibility across the Web3 ecosystem. From Uniswap to Aave, almost every major DeFi application supports ERC‑20 tokens by default, allowing easy integration and scalability for startups and enterprises alike.
Known Risks and Limitations
Despite its strengths, ERC‑20 isn’t without flaws. One of the most criticized features is the “unlimited approval” problem, where users grant contracts unlimited access to their tokens—often unknowingly. A 2022 study found that 60% of ERC‑20 tokens carried this risk, and around 22% of users were exposed to potential fund loss as a result. Moreover, about 58% of ERC‑20 tokens remain admin-controlled, raising concerns about decentralization and trust in many projects.
ERC‑721 & ERC‑1155 NFTs
Where NFTs Really Began
ERC‑721 made history by formalizing the concept of non-fungibility on the blockchain. Initially sparked by the popularity of CryptoKitties, this standard brought unique, verifiable digital ownership into the mainstream. Today, ERC‑721 is the go-to framework for art, collectibles, digital identities, and more.
Explosive Growth in the NFT Space
The NFT market has surged since its inception. In 2023, global NFT sales were valued at approximately $27 billion. Projections suggest that the market could grow at a compound annual growth rate (CAGR) of over 34%, reaching $212 billion by 2030. A large portion of this growth is driven by gaming. Gaming NFTs alone are expected to balloon from $4.8 billion in 2024 to over $44 billion by 2034—powered by titles like Axie Infinity and platforms like Dapper Labs.
The Flexibility of ERC‑1155
While ERC‑721 handles one token ID per contract, ERC‑1155 improves efficiency by supporting multiple token types—both fungible and non-fungible—in a single contract. This innovation is a game-changer for developers working on NFT games, metaverses, or marketplaces where mixed asset types are needed. Batch transfers and lower gas usage make it a technically superior choice for complex asset ecosystems.
ERC‑1400: The Security Token Standard
Made for Regulated Markets
ERC‑1400 brings a different flavor to tokenization by focusing on compliance and control. It includes key features such as permissioned transfers, identity validation, and partitioned ownership. This makes it ideal for businesses looking to tokenize regulated financial instruments—like real estate shares, bonds, equity, or private placements—while staying legally compliant.
Growing Institutional Adoption
As real-world asset tokenization gains momentum, more institutions are leaning into ERC‑1400 or hybrid models based on it. These tokens enable functionalities such as whitelist management and regulatory enforcement directly on-chain, reducing legal overhead and enhancing transparency. Projects using ERC‑1400 are typically built with institutional investors, fintech platforms, or asset managers in mind.
Governance Tokens
Empowering Community Decisions
Governance tokens play a key role in decentralized ecosystems, allowing holders to participate in protocol upgrades, treasury allocation, and strategic direction. Most governance tokens are structured on ERC‑20 or occasionally ERC‑721 (when uniqueness or identity is involved), and work with platforms like Snapshot, Aragon, or Gnosis for decision-making.
Built for Long-Term Flexibility
To keep governance systems upgradeable without losing historical trust, developers often use proxy patterns. These allow smart contracts to evolve while maintaining the same address—a critical feature as projects mature. Data shows that over 14% of Ethereum smart contracts now use proxy-based architectures, and more than 32% support some form of upgradeability, making it a best practice in modern token governance design.
Looking to dominate your niche with a custom token?
Technical & Legal Factors That Shape Your Choice
Choosing a token standard isn’t just about what works now — it’s about what won’t break later. If you want to future-proof your project and stay compliant, you’ll need to think beyond basic functionality. Let’s unpack the technical and legal building blocks that really matter.
Upgradeability: Don’t Lock Yourself In Too Early
Blockchain contracts are famously “immutable,” but modern businesses can’t afford frozen logic. Enter proxy patterns. These allow you to deploy smart contracts that can be updated over time — a must-have if your token might evolve. Recent analysis shows that around 14% of Ethereum contracts use proxies, while over 32% have some form of upgrade support. That’s not a trend; that’s a necessity for scalable projects.
Auditability, Gas Cost, and Batch Functionality
Token that’s easy to audit, cheap to operate, and flexible to use. ERC‑20 tokens are the simplest, but they come with high gas costs when minting or sending in bulk. If you’re launching a gaming, NFT, or DeFi app with lots of interactions, ERC‑1155 could be a smarter choice. Why? It allows batch transfers, which means you can send multiple tokens in a single transaction — a big cost saver.
Regulatory Fit: Token Type Matters More Than You Think
Here’s where many projects slip up — legal classification. Is your token a currency, a utility, or a security? This isn’t just jargon; it defines how and where you can operate.
- Security tokens (like those based on ERC‑1400) often require transfer restrictions, KYC modules, and whitelist enforcement.
- Utility or governance tokens may not need such constraints, but they still need clear documentation to avoid future scrutiny.
Choose the wrong standard, and you might find yourself needing a legal team and a re-deployment neither of which are cheap.
Pre‑Launch Checklist: Critical Questions Before Your Token Deployment
Before you hit the “deploy” button on your token contract, take a step back and ask the questions seasoned builders always ask. These decisions will shape how well your token functions, how easily people can use it, and how confidently investors will hold it.
What Wallets and Marketplaces Will Support It?
ERC‑20 tokens enjoy near-universal support across wallets and exchanges — from MetaMask to Binance. But if you’re building an NFT or game token? ERC‑721 and ERC‑1155 have limited compatibility, depending on the dApp or marketplace. Always verify your standard is compatible with the tools your users already use.
Is Your Token Meant for the Public or a Private Ecosystem?
Some tokens are meant for open ecosystems — tradable, swappable, and liquid. Others serve internal roles — powering private DAOs, gating software, or tracking ownership. Public-facing tokens often benefit from gas-efficient standards and bridgeability. Internal tokens might prioritize permissioning and access control.
Will You Go Cross-Chain Now or Later
Cross-chain functionality is on every roadmap — but bridges aren’t magic. They come with risks (hack vectors, liquidity fragmentation) and added dev overhead. If you’re building with cross-chain ambitions, look for standards with interoperability baked in — or make sure your architecture supports wrapping and bridging protocols like LayerZero or Wormhole.
How Will Governance Be Managed
Tokens often double as voting rights. Whether you’re building a DAO or just need on-chain decision-making, make sure your standard supports vote delegation, snapshotting, or integration with governance frameworks. Most ERC‑20 tokens work with Snapshot, but for on-chain governance, you’ll want extra logic or DAO tools like Gnosis Safe and Tally.
What About Admin Rights and Security Controls?
Who controls the contract? Can approvals be revoked? Is there a risk of accidental fund loss?
- Avoid infinite token allowances unless you include revocation logic.
- Limit admin rights or move them to a multisig or DAO post-launch.
- Run your token through static analysis and audit tools like Slither or MythX before you go live.
Advanced Architectures: Interoperability, Fractionalization, Privacy
As token projects evolve, so do the standards that power them. When you need to move beyond basic token functionality, advanced token architectures can unlock flexibility, scalability, and privacy without compromising on usability.
ERC‑1155: A Hybrid Standard for Versatile Use Cases
ERC‑1155 is often called the “multi-tool” of Ethereum token standards. It lets you mint fungible, non-fungible, and even semi-fungible tokens under a single smart contract. This is a game-changer for projects like video games, where players can own currencies, weapons, and characters all within one contract. Popular platforms like Enjin use ERC‑1155 because it reduces gas costs significantly—batch transfers can be up to 90% more efficient compared to ERC‑721.
Proxy Contracts and Upgradeability: Planning for the Long Haul
Blockchains are immutable, but business needs change. That’s where proxy patterns come in. They allow your token contract to be upgraded over time while maintaining the same address and preserving token balances. Studies show that about 14% of Ethereum contracts now use proxies, and over 32% enable some form of upgrade path. It’s a smart move if you expect to iterate on features or integrate evolving compliance logic.
Cross‑Chain Tokens: Bridging vs. Native Deployments
Expanding across multiple blockchains? You’ll face a choice between bridged tokens and native multi-chain deployments. Bridged tokens offer faster market access but rely on external bridge security—some of which have been targets of major hacks. Native tokens offer tighter integration and higher trust, but you’ll need to deploy and manage logic separately on each chain. Consider user safety, trust layers, and the complexity your dev team can handle.
ERC‑998 and ERC‑721R: Going Fractional and Private
The bundle NFTs (like a character with gear and skins) or enable ownership of fractional NFT shares, ERC‑998 is your go-to. It allows an NFT to own other NFTs or ERC‑20 tokens—a useful tool for composability in metaverse projects or asset portfolios. Meanwhile, ERC‑721R adds a layer of privacy to NFTs using zero-knowledge proofs. It lets users own NFTs without revealing transfer history or identity—critical for finance, healthcare, or sensitive IP-related use cases.
Real-World Project Case Studies
Understanding how top blockchain projects apply token standards in the real world helps demystify the theory. Let’s explore how some of the most successful platforms match standards to their goals.
Uniswap – ERC‑20 for Universal Liquidity
Uniswap’s governance token, UNI, is based on the ERC‑20 standard. Why? Because ERC‑20 tokens plug directly into virtually every wallet, exchange, and dApp in the Ethereum ecosystem. UNI’s role is not just to incentivize liquidity providers but also to allow token holders to vote on upgrades and fee models. Its widespread adoption shows the strength of ERC‑20’s interoperability and simplicity.
OpenSea & Rarible – Using ERC‑721 and ERC‑1155 for NFT Flexibility
These leading NFT marketplaces support both ERC‑721 and ERC‑1155 standards. Why two? ERC‑721 is ideal for unique artworks and collectibles, while ERC‑1155 allows creators to mint multiple editions of the same item efficiently. That dual approach has helped them serve a broader user base, from artists to gamers to large NFT projects needing scale.
RealT – ERC‑1400 for Tokenized Real Estate
Tokenizing real estate is complex, especially when compliance is involved. RealT uses ERC‑1400, a security token standard designed for regulated assets. It allows for built-in permissions, transfer restrictions, and whitelisting—making it possible to legally tokenize real-world properties and distribute fractional ownership that follows regulatory rules.
Axie Infinity – ERC‑721 Powering In‑Game Economies
Each Axie, the digital creature in this play-to-earn game, is represented as an ERC‑721 NFT. These tokens have unique genetic codes, breedability, and battle traits. At its peak, it cost $600 or more to get started—proof of real value in NFT-based economies. The use of ERC‑721 was essential to ensure each Axie was verifiably unique and tradable.
MakerDAO – Governance via ERC‑20 MKR
MKR, the governance token of MakerDAO, is a classic use of ERC‑20. Token holders vote on key decisions like interest rates, collateral onboarding, and risk parameters. However, studies have shown that most governance power is concentrated among a few whales—reminding projects that choosing a standard is only part of the story; distribution matters too.
Conclusion
Choosing the right token standard isn’t just a technical decision—it’s a strategic one that impacts how your token behaves, scales, and engages with users across the blockchain ecosystem. Whether you’re launching a utility token, an NFT collection, or a regulated asset, aligning your choice with your project’s purpose, compliance needs, and growth goals is essential. From ERC‑20’s ubiquity to ERC‑1400’s regulatory readiness and ERC‑1155’s flexibility, each standard offers distinct advantages. By understanding their nuances and learning from real-world applications, you set your project up for success in a fast-evolving landscape. Blockchain App Factory provides Token Development Services to help you build and deploy custom tokens tailored to your business model—securely, efficiently, and at scale.
