From ERC20, 721, 1155 to 3525, detailing the path of RWA towards large-scale implementation in Web3

Since the inception of blockchain technology in 2008, the cryptocurrency market has experienced rapid development. However, the total market capitalization of the entire cryptocurrency market has yet to exceed that of Apple Inc., and Web3 still lacks practical applications in the real world. A recent research report by Citibank titled "Money, Tokens, and Games" may change this situation. The report views the tokenization of real-world assets (RWA) as the main narrative of the next phase, believing that it could have a significant impact on the development of Web3, drive the blockchain and Web3 industry to gain the next billion users, and potentially bring about economic activities on the scale of tens of trillions of dollars.

In the grand narrative of RWA, the ERC-3525 standard shows great potential. As a semi-fungible token standard (SFT), ERC-3525 combines the features of ERC-20, ERC-721, and ERC-1155, allowing for more effective representation and management of complex assets such as bonds, coupons, invoices, futures, options, and ABS. ERC-3525 is expected to facilitate the development of RWA and promote the widespread application of Web3 in the real world.

This article will compare the components of ERC-20, ERC-721, ERC-1155, and ERC-3525, introducing the differences between these token standards. It will explore the modeling ideas of the digital world represented by ERC-3525 from three perspectives and finally look forward to the application areas of ERC-3525 that deserve attention in the future.

Background Introduction

Before introducing ERC-3525, let’s briefly explain the concepts of EIP and ERC:

EIP stands for Ethereum Improvement Proposals (. It is a framework that allows anyone in the Ethereum community to suggest improvements or updates to the Ethereum network. These proposals can involve the Ethereum protocol itself, client APIs, or provide relevant standards for other projects within the Ethereum ecosystem.

ERC stands for Ethereum Request For Comment ), which is a special type of EIP that focuses mainly on standards at the application layer, such as smart contract design patterns and interface definitions. ERC provides standard templates for Ethereum application developers, ensuring that different projects and applications can share interfaces or standards. In short, all ERCs are EIPs, but not all EIPs are ERCs. EIPs cover a broader scope, including changes to the underlying protocol.

ERC-3525 was created by core members of the Solv Protocol on December 1, 2020, with support from core developers of the Ethereum community. It took 20 months from the initial proposal to final acceptance by the community, going through multiple drafts for improvement, and was officially approved as an ERC token standard in September 2022. As an Ethereum standard created by a team of core members from the Chinese community, ERC-3525 is experiencing a new peak of attention in the industry.

Comparison of Existing ERC Token Standards - How to Understand ERC-3525?

ERC-3525 is a semi-fungible token (SFT) standard. Many people may initially think of ERC-3525 as a hybrid of ERC-20 and ERC-721, but in fact, ERC-3525 is a fundamental universal standard that has overwhelming advantages over ERC-20, ERC-721, and ERC-1155 in certain areas. Next, we will understand ERC-3525 by comparing the key components and advantages and disadvantages of other token standards.

( ERC-20

ERC-20 is one of the most widely used token standards on Ethereum, which refers to fungible tokens, where each token is completely equal in function and value. Stablecoins are an important application example of ERC-20, where each stablecoin is fungible and interchangeable, representing the same value.

Key components: address and value. The address specifies the asset owner's address, and value represents the number of tokens owned by that address. Under the ERC-20 standard, each address is associated with a balance that represents the number of tokens held by that address, and all balances are the same without distinction.

Feature Advantages: ERC-20 tokens correspond to interchangeable assets, similar to traditional currencies or shares, and are very useful in many applications, such as representing company shares or as trading pairs on decentralized exchanges ) DEX ###. ERC-20 is widely used in DeFi applications, such as lending platforms and liquidity mining, and can be split into non-integer amounts, allowing ownership of 0.5 ERC-20 tokens.

Limitations: Due to the fully fungible nature of ERC-20 tokens, they cannot be used to represent unique or non-fungible assets, such as artworks or collectibles.

( ERC-721

When mentioning ERC-721, one must mention the non-fungible token )NFT###. Well-known NFTs like Bored Apes and Azuki belong to the ERC-721 standard, which describes how non-fungible tokens are created and managed on the Ethereum blockchain.

Unlike ERC-20 tokens, where each unit is equivalent, each unit of ERC-721 tokens is unique and non-fungible, making them suitable for representing unique digital or real-world assets such as artwork, real estate, collectibles, etc. Although the earliest NFT, CryptoPunk, was based on the ERC-20 standard rather than the ERC-721 standard, its emergence paved the way for the birth of ERC-721, becoming the cornerstone for many valuable applications such as NFTs.

Key components: tokenId and owner. tokenId is a unique identifier used to distinguish different ERC-721 tokens, while owner is the address of the token holder. Under the ERC-721 standard, each token is distinct and unique, differentiated by the ID attribute, with each ID associated with one owner.

Feature Advantages: ERC-721 tokens are non-fungible, each token is unique. They are suitable for representing unique items or assets, such as artworks, collectibles, real estate, and other unique assets. They have significant value in creating and trading digital art and other unique digital assets.

Limitations: Due to the non-fungible characteristics of ERC-721 tokens, they cannot be effectively used to represent interchangeable assets such as currencies or shares, lack advantages in liquidity, have poor composability, and cannot be divided, meaning it is not possible to own 0.5 of an ERC-721 token.

( ERC-1155

ERC-1155 is a multi-instance token standard that combines the features of ERC-20 and ERC-721, designed to handle various types of tokens more efficiently and flexibly. In the previous ERC-20 and ERC-721 standards, each different token required the deployment of a new smart contract, which could lead to duplicate code and expensive gas fees, and complex interactions might also need to be managed between different contracts.

ERC-1155 provides a way to manage multiple tokens within a single smart contract, where each token can be fungible ) like ERC-20 tokens ( or non-fungible ) like ERC-721 tokens ###. For example, in games, ERC-1155 can be used to create different types of weapons ( that are non-fungible ), such as sticks, knives, and guns, while each weapon type ( that is non-fungible ) contains weapons that are fungible, meaning that knife 1 and knife 10 are exactly the same ( fungible ), but a knife and a gun are different ( non-fungible ).

Key components: id, value, and owner. The id is a unique identifier used to distinguish between different ERC-1155 tokens, value represents the quantity of tokens for a specific id, and owner is the address of the token holder. For example, in the case of weapons, different types of weapons represent different IDs, and the quantity of weapons under each type ( ID ) is the Value, and the weapons under each type ( Value ) are the same.

Feature Advantages: ERC-1155 tokens can simultaneously represent fungible and non-fungible assets, which are useful in a variety of applications. For example, a game might use ERC-1155 tokens to represent a player's equipment type ( non-fungible ) and the quantity of equipment ( fungible ).

Limitations: Although the flexibility of ERC-1155 tokens makes them very useful in many cases, this flexibility can make understanding and implementing ERC-1155 potentially more complex than ERC-20 or ERC-721. Additionally, it cannot represent partially fungible assets, such as bonds or futures, and cannot be non-integer divisible, meaning you cannot own 0.5 of an ERC-1155 token.

( ERC-3525

ERC-3525 is a semi-fungible token standard )SFT( that combines features of ERC-20, ERC-721, and ERC-1155. It is more complex than ERC-1155 but can be used to express and manage complex digital financial assets such as securities, bonds, options, futures, swaps, insurance strategies, etc., offering greater composability than other token standards. ERC-3525 represents a modeling concept of the digital world, which can be understood from three levels: a splittable and combinable super NFT, a universal digital container, and a visualized smart contract.

Key components: id, value, Slot, and Address. Each SFT has an id attribute equivalent to ERC-721 to identify it as a globally unique entity, allowing SFTs to be transferred and approved between addresses in a way compatible with ERC-721. In addition, each token also contains a value attribute, representing the quantity nature of the token, similar to the "balance" attribute of ERC-20 tokens.

Address represents an address that owns Slots and IDs, and each address can have any number and type of IDs and Slots. Notably, the Slot property allows different IDs with the same Slot to transfer and exchange their Values, while transfers and exchanges cannot occur between different Slots. One Slot can have many types of IDs, but different IDs can only have one Slot.

The focus of ERC-3525 is on Slots. In simple terms, a Slot represents a category, and under the same Slot, there can be many IDs. Each ID is different and has its own Value, but different IDs under the same Slot can be considered as interchangeable combinations. For example, in the case of membership cards, suppose there are two Slots, KFC and McDonald's. Each KFC and McDonald's membership card has different IDs representing different people's cards, such as Satoshi Nakamoto's card and Vitalik Buterin's card. Each person's membership card has a Value representing their points.

In the same Slot, points in the Satoshi card and points in the V God card are considered the same thing as in the KFC membership card. Satoshi can transfer points to the V God card and also receive points sent from the V God card. Satoshi can also split the points in his own points card into two different IDs, the main card and the sub-card ), and allocate points with value ### as desired, and can also merge the main card and the sub-card back together.

In different slots, KFC and McDonald's are two different companies, so KFC's points cannot be transferred to McDonald's points card, and naturally, they do not have the transferability, exchangeability, and combinability between Value and ID.

Feature Advantages: ERC-3525, due to its more complex structure, can represent various complex digital structures such as securities, bonds, options, futures, swaps, insurance strategies, membership cards, etc. Additionally, because it is a semi-fungible token, each token can have its own characteristics and rules, making this standard very flexible and powerful. Furthermore, due to the existence of Slots, ERC-3525 can realize transfers from ID to ID, just like Satoshi's points card transferring points to Vitalik's points card, and it can also support non-integer splits and combinations.

Limitations: The complex structure of ERC-3525 results in a higher threshold for understanding. Due to the presence of Slots, there are more centralized characteristics in the technical structure. The development difficulty is high.

Understanding ERC-3525 as a Digital World Modeling Concept from Three Perspectives

ERC-3525, due to its more complex structure compared to other token standards, serves as a universal token standard through its