Ethereum Token Standard: Introduction and comparison of ERC20 and ERC223

Tokens are the way in which values are defined in a blockchain to demarcate financial or digital assets. In Ethereum, tokens use the same standards, which makes it easy to exchange and DAPP support between tokens. What is the ERC20 standard

The ERC-20 standard, introduced in November 2015, uses tokens of this rule to show a common and predictable approach. Simply put, any ERC-20 token can be immediately compatible with Ethereum wallets (almost all of the bitcoin-enabled wallets, including Jaxx, MEW, Imtoken, and erc-20 tokens), since the exchange already knows how these tokens operate, They make it easy to integrate these tokens. This means that in many cases, these tokens can be traded immediately.

ERC20 is the standard interface for each token. ERC20 tokens are only a subset of Ethereum tokens. To be fully compatible with ERC20, developers need to integrate a specific set of functions (interfaces) into their smart contracts so that they can do the following at a high level:

Get Total token supply

Get account balance

Transfer tokens

Approval to spend tokens

ERC20 seamlessly interacts with other smart contracts and de-centralized applications on the Ethereum blockchain. Some tokens that have some but not all ERC20 standard functions are considered partially ERC20 compatible, depending on their specific missing features, but overall they are still easy to interact with outside.

ERC-20 standards still need to be perfected. One hurdle is that a smart contract that sends a token directly to a token will result in a loss of money. This is because a token contract only tracks and allocates funds. For example, when you send a token from your wallet to another user, the wallet will call the token's contract to update the database. So if you try to transfer the token directly to the token's contract, the money is "lost" because the token's contract is not responding.

ERC223 is the first problem to be solved.

Since the introduction of the ERC20 token standard, almost all Ethereum-based tokens have successfully accepted this new standard. However, its shortcomings need to be resolved in a timely manner, which is why the ERC223 token was born.

The ERC20 standard cannot process incoming transactions through a receiver contract. This is the biggest problem with the token, and is where developers have always wanted to improve. ERC20 tokens cannot send tokens to a contract that is incompatible with these tokens, and because of this, some of the funds are at risk of being lost.

According to an article on the Reddit, a $400,000 ERC20 token was trapped in the "wrong" contract, a huge threat to the entire Ethereum ecosystem. Fortunately, the ERC223 token solves this dilemma if the token is approved and introduced.

The ERC223 token standard will introduce a new feature to the existing ERC20 standard to prevent accidental transfers from occurring. The ERC223 token standard prevents tokens from being lost on the Ethereum network.

Assuming that the ERC223 token standard can replace ERC20 as a new standard, the issuer of the existing token needs to make some tough decisions. Because, in reality, it is not possible to convert from ERC20 to ERC223 in any way, and all ERC20 tokens need to be redeployed under the ERC223 standard. This also means that any trading platform listing needs to update their information and address. This is a hard process, which means that very few existing tokens are effectively converted to ERC223 in the future.

As Alex van de Sande points out on Reddit, the"more convenient" process might be to create new tokens that are supported by contracts that hold old tokens. This may be the most reasonable choice for most projects, but only time can determine which options will be implemented.