An Overview of Ethereum Token Standards and Their Analogues On Leading Chains

| November 17, 2023

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Ethereum Token Standards

The creation of Ethereum cemented blockchain technology’s significance, bringing to the table a decentralized virtual programmable machine. Developers are using Ethereum to create next-gen applications that are set to replace centralized systems for finance and beyond. This distributed virtual computer is the reason for the makings of programmable money — crypto tokens that can be harnessed to operate self-executing smart contracts, which bring several ingenuine use cases. Therefore, tokens have become a chief aspect of Ethereum and other decentralized ecosystems, as they enable dApp functionality.

Smart contracts, the execution layer behind dApps, combined with crypto tokens, trigger the execution of use cases across the Ethereum network. While each dApp project on the network consists of native tokens that allow users to access the project’s utility, certain dApps like DEXs and wallets are known to interact with a large variety of tokens created and deployed on the Ethereum network. Of course, the level of compatibility amongst all tokens and dApps present on a network of this scale needs conventions bringing uniformity to how they are created and deployed. These conventions are referred to as the Ethereum token standards, more broadly referred to as ERCs, and native token standards similar to ERCs exist on other programmable blockchains.

Ethereum Token Standards

Token standards on Ethereum are sets of guidelines agreed upon by the ecosystem’s developer community for the seamless interaction between tokens and smart contracts. The ERC-20 token standard was the first standard for tokens, and it proposed a uniform interface on smart contracts for tokens of the ERC-20 kind, enabling their interoperability with a whole host of dApps as presently witnessed on the network.

For example, popular DEXs on Ethereum allow for all ERC-20 tokens to be traded, swapped, and more because the tokens and smart contracts are developed according to the ERC-20 framework directing standards for compatibility. This ensures that newly developed ERC-20 tokens are implemented with ease on any DEX on the network. Without these standards, token interoperability on DEXs and other dApps like wallets, yield farms, etc., would not be possible, and DeFi as a novel financial system would not exist.

Token standards are a subset of the larger smart contract standards present on the Ethereum network, and the acceptance of these frameworks as standards by the community reflect its democratic governance process. The process begins with a proposal of features and processes known as an EIP (Ethereum Improvement Proposal). EIPs can be brought by anybody, and the core developers of the network vote on their approval and implementation as standards referred to as ERCs (Ethereum Request for Comments). ERCs set the framework for various aspects at the protocol application level, like package formats, name registries, and, more importantly, token standards, which are concerned with token interaction on dApp smart contracts. To understand broadly how token standards facilitate the growth of the Ethereum ecosystem, we need to look into the ones that brought about the most popular use cases.

Popular Ethereum Token Standards

Some of the token standards implemented by the Ethereum community led to the creation of revolutionary decentralized systems and applications like DeFi and NFTs. Consequently, similar standards were also implemented on other blockchain networks to bring about such use cases for their ecosystems. However, before we look into other chains and their token standards, here are some of Ethereum’s game-changing token standards.

ERC-20 Token Standard

The ERC-20 token standard facilitates the development and deployment of fungible tokens on the Ethereum network. Fungible tokens refer to the kind that holds the same value and can be interchanged with each other, like two dollar bills. The tokens following this standard led to the development of several prominent applications in the decentralized world, like DEXs, stablecoins, and many more that are collectively referred to as DeFi. Of course, a lot of use cases beyond DeFi also exist because of this standard, like protocol governance, thanks to the ability to deploy governance tokens.

The ERC-20 standard was proposed in 2015 and implemented in 2017, which led to the rise of ICOs through which several projects started offering tokens to investors. These tokens harnessed through compatible smart contracts across the Ethereum network have allowed users to explore various use cases whose benefits have driven up blockchain adoption ever since.

ERC-721 Token Standard

While the ERC-20 token standard deals with fungible tokens, non-fungible ones, known as NFTs, were introduced to Ethereum’s ecosystem with the implementation of the ERC-721 token standard. These tokens are inherently different from one another and, unlike their counterparts, cannot be interchanged. This introduces a whole set of use cases to the blockchain, such as representing real-world aspects as tokenized assets on-chain.

NFTs drove up blockchain interaction with the utility they found in the world of art and collectables but are being used for other purposes like the representation of real estate ownership on the blockchain and more.

ERC-1155 Token Standard

The ERC-1155 token standard implements the best of the preceding token standards — ERC-20 and ERC-721. This standard allows smart contracts to leverage the use cases brought about by both ERC-20 and ERC-721 token standards, allowing fungible, non-fungible, and semi-fungible applications to be transacted on a single interface.

The ERC-1155 standard’s implementation is leading to the development of smart contracts that allow the network to scale. Faster and cheaper transactions are possible as the standard allows for various assortments of ERC-20 tokens and multiple ERC-721 NFTs in batches to be transacted in a single transaction by the execution of a single contract. While the previous standards brought great utility, the ERC-1155 token standard pushes dApp functionality beyond the limitations of its predecessors.

Ethereum Token Standards Analogues On Other Blockchains

While Ethereum is the most popular programmable blockchain, other leading blockchains also offer great use cases thanks to smart contract utilization. They, too, govern the development of tokens and their interaction with smart contracts by implementing token standards.

Binance Smart Chain

The Binance ecosystem is quite popular for all the applications and services it is known to provide. Users can indulge in various tools, from centralized exchanges to decentralized protocols operating on the underlying Binance Smart Chain. An extensive range of tokens and projects exist thanks to the ecosystem’s developer community, and token standards are implemented through proposals known as BEP (Binance Chain Evolution Proposal) to maintain composability between tokens and projects.

Binance’s popular token standards are the BEP-20 and BEP-721, which are analogous to Ethereum’s fungible and non-fungible token standards, respectively. The Binance Smart Chain, therefore, allows users to indulge in DeFi and NFT applications like Ethereum.

Tezos

Tezos, another popular blockchain known for its unique self-amending governance system, allows its community members to submit framework proposals called TZIPs (Tezos Interoperability Proposal). These proposals, when implemented as token standards through consensus, are referred to as FAs (Financial Applications).

Tezos’ token standard FA 1.2 refers to its fungible token standard corresponding to Ethereum’s ERC-20, and the FA2 token standard is more like the ERC-1155 that allows multi-token support, including non-fungible and semi-fungible tokens. Like on Ethereum, Tezos’ FA2 token interfaces are witnessing wider usage due to their ability to allow multiple token types to be transacted on smart contracts.

TRON

TRON is a highly scalable blockchain network that, at one point, was the third largest smart contract ecosystem in terms of TVL (Total Value Locked). Of course, like other programmable blockchains, TRON also implements token standards called TRC (TRON Request for Comment) to maintain token-smart contract compatibility across the network.

Token standard TRC-20 allows for fungible tokens to interact with smart contract interfaces across the TRON network, and the TRC-721 token standard is implemented for non-fungible token composability with smart contracts. Obviously, from their nomenclature, the TRC-20 token standard emulates the ERC-20 token standard, and TRC-721 emulates the ERC-721 token standard.

Token Standards Foster a Highly Diverse Yet Cohesive Ecosystem

Token standards are an essential aspect of development on blockchain ecosystems as they define the parameters along which applications like tokens and smart contracts should be built. This offers the interoperability needed for a decentralized ecosystem where liquidity can be moved through various protocols. Not only does this bring a larger scale of use cases to network users but it also incentivizes developers to build projects that are on the bleeding edge of innovation. With the development of more innovative projects, blockchain technology looks to replace legacy systems.

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More on Crypto

As we continue constructing a fully regulated digital asset custody platform, ensuring secure storage for both crypto and fiat assets remains a critical priority. 

To facilitate the last checkpoint of enabling institutions to convert their digital asset treasury into fiat currency, we’re expanding beyond pure wallet infrastructure and integrating seamless fiat off-ramp capabilities for our partners.

We’re thrilled to announce our partnership with Encryptus, licensed and compliant off-ramp solutions tailored for institutional clients. This collaboration elevates Liminal’s service offerings by empowering our partners to convert their digital asset treasuries into fiat currencies efficiently.

Integrating A Seamless Off-Ramp Solution

The digital asset ecosystem historically faced friction points when transitioning between fiat and cryptocurrencies. Off-ramp solutions address this pain point by enabling efficient and streamlined conversion between asset classes, minimising value loss and simplifying compliance processes.

Here’s how off-ramp changes the game:

  • Reduced Friction: Frictionless conversion minimises delays and operational complexities associated with traditional fiat-crypto exchange methods.
  • Enhanced Efficiency: Streamlined workflows expedite asset conversion, increasing speed and cost-effectiveness for institutional and individual users.
  • Optimised Value Preservation: Advanced off-ramp solutions prioritise minimising price slippage and value loss during conversion, protecting user portfolios.
  • Simplified Compliance: Integrated compliance features navigate regulatory complexities, ensuring adherence to relevant financial regulations.

With our partnership with Encryptus, we have embedded their institutional-grade APIs, connecting their off-ramp solution within Liminal’s wallet and custody platform. 

This integration simplifies our clients’ liquidation requirements while keeping their assets secure and more:

  • Effortless Digital Asset to Fiat Conversion: Our partners will be able to access treasury management and facilitate business payments in 54 countries and individual payments in an extensive network of 80+ countries.
  • Streamlined Compliance and Regulation: Our partners will be able to leverage Encryptus’s rigorous licensing and compliance framework, ensuring adherence to stringent financial regulations.
  • Enhanced Platform Value: We will be able to expand the functionality of the Liminal custody solution, attracting institutional users seeking comprehensive digital asset management capabilities.

Moving Towards A Robust Off-Ramp Partnership With Encryptus

The partnership between Liminal and Encryptus earmarks a significant step forward in secure digital asset custody, representing a shared commitment to pushing compliant practices while supplying institutions with easy access to convert their digital assets to fiat. 

For Encryptus, the opportunity to integrate with Liminal’s established platform presents a chance to reach a wider audience and scale their innovative off-ramp solutions to new heights. By streamlining fiat conversion within Liminal’s secure custody infrastructure, Encryptus gains access to a trusted network of institutional users seeking seamless and compliant treasury management.

For Liminal, this collaboration reinforces our dedication to partnering with companies that demonstrably prioritise clear governance and robust policy frameworks. By aligning with Encryptus’s stringent compliance standards, we reaffirm our commitment to building a secure and sustainable future for digital assets, where trust and regulatory certainty go hand-in-hand.

January 22, 2024

Hello world, it’s that time of the month when we share the biggest security breaches in the world of Web3 through our Security and Regulatory Newsletter. 

Liminal believes in optimizing security and custody practices globally across the Web3 industry. Through our Newsletter, we highlight security, regulations, and compliance incidents that have happened in the past month and how one can follow better Security practices to safeguard their digital assets. 

We will also highlight regulatory changes that might have happened globally, which were significant to the overall ecosystem.

Dive in and get a detailed analysis of everything security and regulation in the domain of web3 with Liminal’s Monthly Security and Regulatory Newsletter.

Web3 Security Compromises in January

Abracadabra exploited for almost $6.5 million, Magic Internet Money stablecoin depegs

The Magic Internet Money ($MIM) stablecoin has lost its dollar peg again, dipping all the way below $0.77 in a flash crash before returning to around $0.95.

The depeg appears to be related to an exploit of the Abracadabra lending protocol, which allows people to borrow $MIM. An attacker exploited an apparent flaw in the platform’s smart contracts to drain around $6.5 million.

Goledo Finance hacked for $1.7 million

Goledo Finance, an Aave-based lending protocol, was exploited through a flash loan attack. The attacker stole assets estimated by CertiK to be around $1.7 million.

Goledo Finance contacted the attacker to offer a 10% “bounty” for the return of the remaining assets. In a message on January 29, the attacker wrote: “I hacked Goledo and want to negotiate.”

Socket service and its Bungee bridge suffer $3.3 million theft

The Socket cross-chain infrastructure protocol was hacked for around $3.3 million in an attack that exploited its Bungee bridge. The thieves were able to exploit a bug that allowed them to take assets from those who had approved a portion of the system called SocketGateway.

A little over 700 victims were affected, and the highest loss from a single wallet was around $657,000. 121 wallets lost assets priced at more than $10,000.

On January 23, the protocol announced they had recovered 1,032 ETH (~$2.23 million) of the stolen funds.

Web3 Regulatory Practices for January

The EU Imposes Stricter Due Diligence Rules for Crypto Firms

On Jan. 17, the European Council and the Parliament came to a provisional agreement on parts of the Anti-Money Laundering Regulation (AMLR) that now extends to the crypto sector.

Under the new rules, cryptocurrency firms will be required to run due diligence on their customers involving a transaction amounting to €1,000 ($1,090) or more. 

However, the agreement isn’t final yet as it has to be first officially adopted by the Council and Parliament before the rules can be applied.

So, after the EU passed its landmark MiCA regulation last year, which clarified rules about cryptocurrencies, regulators are now targeting the space with tighter controls. 

While these regulations bolster security and trust in the crypto market, potentially attracting more cautious investors and combating financial crimes, they also present challenges. 

The US State of Virginia Introduces Digital Assets Mining Rights

Recently, the Virginia State Senate introduced Bill No. 339, which outlines regulations for the transactions and mining of digital assets and their treatment under tax laws. 

The legislation exempts individuals and businesses engaged in crypto mining activities from obtaining money transmitter licenses. Additionally, it protects miners from any discrimination. 

Issuers and sellers of crypto are also exempted from securities registration requirements if certain conditions are met. Moreover, those offering mining or staking services are not to be classified as “financial investment” but must file a notice to qualify for the exemption.

The bill further incentivizes crypto’s use for everyday transactions by offering tax benefits. Under this, up to $200 per transaction can be excluded from an individual’s net capital gains or gains derived from using crypto to purchase goods or services, starting from Jan. 1, 2024.

Key Takeaways:

  • Hackers continue to exploit vulnerabilities in DeFi protocols and cross-chain bridges, highlighting the need for robust security measures.
  • Regulatory frameworks are evolving rapidly, with stricter AML rules and supportive legislation for emerging technologies like crypto mining.
  • Staying informed about these developments is crucial for navigating the digital assets market safely and responsibly.

Stay #LiminalSecure

These events highlight the constant evolution of Web3 security and regulation. You can confidently navigate this dynamic landscape by staying informed and prioritizing security best practices. 

At Liminal, we’re committed to empowering institutions to unlock the full potential of digital assets without compromising security or compliance norms with our robust custody and wallet infrastructure solutions. Join us on this journey towards a safer, more accessible future for digital assets.

January 15, 2024

Buckle up as we’re about to take a trip down memory lane. 

The year 2023 was a wild ride that showed signs of a plummeting market, groundbreaking innovation and regulatory hurdles. 

Contrastingly, in the same year, we saw no market-shattering crashes. Financial institutions extending an olive branch, key jurisdictions unlocking the doors to blockchain technology. 

Simultaneously, at Liminal, we experienced significant breakthroughs, re-engineering our positioning and becoming a pioneer in digital asset security with bank-grade custody. 

We took major strides this year, right from building comprehensive products to becoming a qualified custodian, from revamping our brand design to expanding our offices in newer locations, from partnering with hyper-local communities to onboarding a diverse set of clients,  we did it all. 

So, let us take you through everything we accomplished in 2023 and what the future holds.  

Liminal Became A Qualified Custodian

One of the prominent moves we made this year was to change our positioning as a regulated custodian from being a wallet infrastructure platform. 

We got two licenses in key jurisdictions to operate as a regulated custodian. 

The first one came from Hong Kong, where we acquired the TCSP license issued by the SFC, which oversees and regulates financial activities to ensure compliance with legal and regulatory obligations. 

Our next license came in the MENA region, where we got In-Principle Approval for the FSP license granted by the FSRA, a governing body in ADGM, to establish a progressive financial services environment. 

Both these licenses paved the way for Liminal to push its wallet infrastructure and offer bank-grade custody to institutions looking to operate in these particular regions. 

Liminal Introduced A Suite of Products & Features

Continuing our building spree, we launched new products and integrations to broaden the existing infrastructure and added more parameters of security, scalability and sustainability. 

Staking-as-a-Service

Liminal launched staking for institutions to eliminate the risks involved in running staking nodes and the vulnerabilities in hot wallet transfer. 

Hence, we introduced an industry-first mechanism of cold wallet staking to ease staking for institutions and secure assets explicitly.  

Whitelabel Solution

Accelerating the go-to-market time for organisations looking to build a secure and customisable application, Liminal launched its whitelabel solutions

Targeted to help organisations meet security standards, manage assets with maximum control, and add their custom branding to give it a personal touch. Our whitelabel solution is a first-in-class custodian-developed solution for institutional grade custody.

Smart Consolidation

We are building not just secure custody but also automation-based features to eliminate manual errors, increase the throughput of transactions and scale institutional wallets. 

Taking this ahead, we launched the Smart Consolidation feature to automatically calculate all the active addresses and consolidate them into a single address. With this level of automation, managing multiple addresses becomes uber easy for wallet teams. 

Travel Rule 

To limit the use of cryptocurrencies for activities like money laundering and terror financing by regulatory bodies, travel rule was mandated for institutions to follow. 

Continuing the latest compliance integration policy, Liminal partnered with Notabene to introduce Travel Rule, enabling institutions to manage counter-party risk and extend the process of due diligence right from the Vaults dashboard.   

Liminal Accured List Of Security Certifications

Following our ISO certification for data privacy and risk management, we added two new security certifications to fortify our systems and build trust for our clients. 

Liminal Achieves Crypto’s Highest Security Mark: CCSS Level-3 Certified

Cryptocurrency security lacked a gold standard, creating a vulnerable ecosystem. Enter the CryptoCurrency Security Standard (CCSS), setting the bar for auditing and certifying custodian infrastructure and establishing levels of trust and confidence for investors. 

Liminal became only the second wallet infra platform and the first regulated custodian to be accredited with Level-3 certification, deeming wallets, transfer environments, workflows and engines safe and secure. 

Liminal Reciueved SOC 2 Type II Certification

To tackle threats in institutional-grade security, organisations’ SOC has been identified as the primitive compliance standard for service organisations to handle customer data.

Liminal successfully attained SOC 2 Type II certification, validating its setup of security controls & compliance processes to be industry standard. 

Liminal Level Up

Liminal unveiled its most significant platform upgrade ever, revolutionising the future design standard of a qualified custodian. This level-up activity included revamping our website and product UI, giving a completely new look and feel to not “Liminal” but “Liminal Custody”. 

The Liminal level-up activity was a strategic step and the biggest one for us this year to create an intuitive, inviting and tailored experience for our clients. 

Liminal Reached New Borders

We spread out our operations this year, reaching new borders and onboarding a new wave of institutions across gaming, DeFi, HNI wealth, treasuries, and exchanges! From Indonesia and Africa to India, UAE, and Korea, we are setting up custody operations worldwide. 

This isn’t just a roster of clients; it’s a network ready to spark connections, collaborations, and shared success to further the definition of secure assets. 

Liminal Collaborated With Law Enforcement Agencies

The best and the proudest moment of Liminal for this year was when we collaborated with CBI & Himachal Prashesh police department to aid them in seizing digital assets. 

This partnership put us on the map, as we became the first point of contact for LEAs in India, and we standardised the process of secure seizure of digital assets. Leveraging our expertise, we enabled a safe space for officers to learn the basics of custody, contributing to a safer digital landscape.

Team Liminal Grew Bigger

Building such a massive infrastructure, prioritising security and compliance over everything else, we had to grow the team to build at pace and expand at an even higher level. Not only did we grow in team numbers, but we also elongated our footprint to new destinations. 

Team Liminal went from 32 to 70 with 5 new offices in Mumbai, Ahmedabad, Hong Kong, Singapore and ADGM, setting up our custody operations steadfastly. 

What’s To Look Out For In 2024

We are excited to announce that our commitment to integrating the most secure digital asset wallets with a cutting-edge custody platform is swiftly becoming a reality. 

The upcoming year, 2024, will serve as a testament to this transformative journey. Moving beyond self-custody, we are constructing a comprehensive infrastructure encompassing both custodial and non-custodial wallets. Exciting products are set to launch starting from the first week of January, some of which are: 

  • Official Custody Platform Launch
  • Liminal’s Off-Exchange Settlement Hub
  • Secure Custody of Real-World ‘Tokenised’ Asset

The Web3 space has evolved explicitly this year, pushing the narrative of secure digital asset custody and security, introducing new regulations and compliance standards, licensing VASP providers and standardising the use of custodians as a trusted third party. 

At Liminal, we took major strides this year, from building comprehensive products to becoming a regulated custodian, from revamping our brand design to building the full infrastructure of custodial and non-custodial wallets.

January 5, 2024

Find Out How You Can Benefit From A Fully Self-Custodial Wallet Architecture