What Is Token Standard?
A token standard defines the rules, functions, and interfaces that tokens must implement to be compatible with wallets, exchanges, and applications on a specific blockchain. Standards ensure interoperability — any wallet that supports the standard can handle any token following it. The most important standards are ERC-20 (fungible tokens), ERC-721 (NFTs), and ERC-1155 (multi-token).
How Token Standard Works
ERC-20 defines the standard interface for fungible tokens: functions like transfer(), balanceOf(), approve(), and totalSupply(). Any application that knows the ERC-20 interface can interact with any ERC-20 token. ERC-721 defines the standard for non-fungible tokens (unique assets). ERC-1155 combines both fungible and non-fungible token capabilities in a single contract, improving gas efficiency.
Why It Matters for Traders
Understanding token standards helps traders evaluate new tokens: an ERC-20 token is compatible with all major wallets and DEXs. Non-standard or custom token contracts should raise red flags — they may contain hidden functionality (transfer restrictions, hidden minting, blacklists) that isn't possible in standard implementations. Always verify that a token follows established standards before significant investment.
