ERC-721 and ERC-20 are two of the most widely used standards for creating tokens on the Ethereum blockchain. These standards define a set of rules and interfaces that developers can follow when creating tokens, enabling interoperability and compatibility across various decentralized applications (DApps) and platforms.

ERC-20:

• Name: Ethereum Request for Comments 20 (ERC-20).
• Type: Fungible Token Standard.
• Purpose: ERC-20 is the most common standard for creating fungible tokens on the Ethereum blockchain. Fungible tokens are interchangeable and have identical values, making them suitable for representing currencies or assets with a uniform value.
• Key Functions:
  1. totalSupply: Returns the total supply of tokens.
  2. balanceOf: Returns the token balance of a specific address.
  3. transfer: Sends a specified number of tokens to another address.
  4. approve: Allows a spender to withdraw a certain amount of tokens from the owner’s account.
  5. transferFrom: Allows a designated spender to transfer tokens on behalf of the owner.
  6. allowance: Returns the remaining number of tokens that a spender is allowed to withdraw.
• Use Cases: ERC-20 tokens are commonly used for Initial Coin Offerings (ICOs), tokenized assets, and various utility tokens within decentralized applications.

ERC-721:

• Name: Ethereum Request for Comments 721 (ERC-721).
• Type: Non-Fungible Token (NFT) Standard.
• Purpose: ERC-721 is designed for creating unique, indivisible tokens, known as Non-Fungible Tokens (NFTs). Each token has a distinct value and properties, making it suitable for representing ownership of unique assets like digital art, collectibles, or in-game items.
• Key Functions:
  1. totalSupply: Returns the total number of unique tokens.
  2. balanceOf: Returns the number of tokens owned by a specific address.
  3. ownerOf: Returns the address that owns a specific token.
  4. approve: Grants approval for a designated address to transfer a specific token.
  5. getApproved: Returns the address approved for a specific token transfer.
  6. transferFrom: Transfers ownership of a specific token from one address to another.
• Use Cases: ERC-721 tokens find applications in areas where uniqueness and ownership of digital or physical assets need to be securely represented on the blockchain, such as digital art, collectibles, and gaming items.

In summary, ERC-20 tokens are fungible and interchangeable, while ERC-721 tokens are non-fungible and represent unique assets. Both standards have played a significant role in the growth of the decentralized finance (DeFi) and blockchain-based asset ownership ecosystems on the Ethereum blockchain.

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Here are the top 10 purposes of ERC-20 and ERC-721 tokens in Web3:

ERC-20:

1. Fungible Tokens:
   • ERC-20 defines a standard for creating fungible tokens on the Ethereum blockchain.
   • Fungible tokens are identical and interchangeable, meaning each unit is the same as every other unit, making them suitable for representing currencies or assets with uniform values.
2. Token Information:
   • ERC-20 tokens maintain basic information such as the total token supply, the balance of tokens for a specific address, and the allowance granted to a spender.
3. Transfer of Value:
   • ERC-20 provides functions like transfer to send a specified number of tokens from one address to another, enabling the transfer of value within the Ethereum network.
4. Smart Contracts:
   • ERC-20 tokens are often used to create smart contracts for Initial Coin Offerings (ICOs), tokenized assets, and utility tokens within decentralized applications (DApps).
5. Interoperability:
   • ERC-20’s standardized interface ensures interoperability across various DApps, exchanges, and wallets, making it easier for developers and users to interact with different ERC-20 tokens.

ERC-721:

1. Non-Fungible Tokens (NFTs):
   • ERC-721 defines a standard for creating non-fungible tokens on the Ethereum blockchain.
   • NFTs are unique and indivisible, each with distinct properties and values, making them suitable for representing ownership of one-of-a-kind assets.
2. Digital Ownership:
   • ERC-721 tokens are widely used to represent ownership of digital or physical assets such as digital art, collectibles, real estate, and in-game items.
3. Token Identification:
   • Each ERC-721 token has a unique identifier, and its ownership is secured on the blockchain. The standard provides functions to query ownership, get information about a token, and transfer ownership securely.
4. Transfer of Ownership:
   • ERC-721 tokens enable the transfer of ownership from one address to another, allowing the secure exchange of unique assets on the Ethereum blockchain.
5. Diverse Applications:
   • ERC-721 tokens find applications in various sectors, including digital art platforms, online gaming, virtual real estate, and decentralized applications that require representation of unique, scarce assets.

In summary, ERC-20 is designed for fungible tokens that represent interchangeable values, while ERC-721 is tailored for non-fungible tokens that represent unique, indivisible assets. Both standards contribute to the richness and versatility of the Ethereum ecosystem by providing a standardized way to create, manage, and exchange different types of tokens on the blockchain.

ERC-20:

1. Currency and Payments:
   • ERC-20 tokens are commonly used as digital currencies within decentralized applications (DApps) and smart contracts.
   • They can represent stablecoins, utility tokens, or other forms of digital currency used for transactions and payments.
2. Initial Coin Offerings (ICOs):
   • ERC-20 tokens are widely employed for fundraising through Initial Coin Offerings (ICOs). These tokens are distributed to investors during a token sale, providing them with a stake in the project.
3. Tokenized Assets:
   • Various real-world assets, such as real estate, commodities, or company shares, can be tokenized using ERC-20 tokens. Each token represents a fraction of ownership in the underlying asset.
4. Decentralized Finance (DeFi):
   • Many decentralized finance applications utilize ERC-20 tokens. These tokens serve as collateral, governance tokens, or liquidity providers within lending, borrowing, and yield farming protocols.
5. Rewards and Loyalty Programs:
   • ERC-20 tokens are employed in reward and loyalty programs within DApps or platforms. Users can earn and redeem these tokens for specific benefits or services.
6. Interoperability:
   • The standardized nature of ERC-20 tokens ensures interoperability, making it easy for exchanges, wallets, and other DApps to support a wide range of tokens with a consistent interface.

ERC-721:

1. Digital Art and Collectibles:
   • ERC-721 tokens are widely used to represent ownership of digital art and collectibles. Each token can represent a unique piece of digital or virtual artwork, ensuring scarcity and provenance.
2. Gaming Assets:
   • In the gaming industry, ERC-721 tokens are employed to represent unique in-game assets. Players can buy, sell, and trade these assets securely on the blockchain.
3. Virtual Real Estate:
   • Platforms that deal with virtual worlds and virtual real estate use ERC-721 tokens to represent ownership of unique parcels of land or virtual properties.
4. Identity and Certification:
   • ERC-721 tokens can be used to represent digital identities or certifications. Each token can serve as a unique, verifiable credential on the blockchain.
5. Token Curated Registries (TCRs):
   • TCRs use ERC-721 tokens to curate lists of unique items or entities. Token holders can propose, vote, and challenge items within the list, creating a decentralized curation system.
6. Event Tickets:
   • ERC-721 tokens can represent event tickets, ensuring that each ticket is unique and can be securely transferred or sold on the blockchain.

In summary, ERC-20 tokens are more suitable for representing fungible assets, currencies, and financial instruments, while ERC-721 tokens excel in representing unique, non-fungible assets like digital art, collectibles, and gaming items. The versatility of these standards contributes to the growth of the Ethereum ecosystem by enabling a wide range of applications across various industries.