ERC20 vs ERC721 vs ERC1155

A token refers to specific virtual tradable assets that reside on their blockchain. These tokens can be fungible or non-fungible depending on what’s the purpose and functionality needed by the creator of the token.

Here are the three most commonly practiced token standards they are ERC20, ERC721 and ERC1155.

• ERC20
  - These are generally used to represent fungible assets like cryptocurrencies or securities.
  - It's an Ethereum-based asset living on the blockchain network.
  - ERC20 is an open standard that allows developers to create their own tokens in order to represent assets on the Ethereum network
  - ERC20 tokens are designed to be used as value transfer mechanisms within the Ethereum ecosystem. They can be used to pay for services or access premium features on an ERC20-compatible application.
  - Ripple, a major player in the cryptocurrency industry, used an ERC20 token called XRP to power their payment system back when it launched in 2012. By doing so, they were able to bypass traditional banking systems and create a faster way for consumers around the world to send money back and forth with ease.

• ERC721
  - ERC721 is an extension of the ERC20 standard which allows developers and users to create non-fungible tokens by adding metadata onto their smart contracts or off-chain like names, descriptions, and ownership information.
  - These tokens are generally traded on Opensea, Looksrare or similar marketplaces.
  - These types of tokens even have a royalty model where once sold by the creator can still earn through secondary royalties, i.e. they earn a cut of the sale even when others are trading the NFT.
  - ERC721 tokens are one-of-one that is they only contain a single owner, i.e they are one of a kind

• ERC1155
  - Let me explain this with an example, if you created a token with the ID of "1000" that represents a potion, you could create multiple instances of this token with the same ID, each representing a separate unit of the potion. Each unit of the potion would be indistinguishable from the others and could be traded or exchanged freely with any other unit of the same token ID.

  This is in contrast to non-fungible tokens (NFTs) like ERC-721, where each token represents a unique, indivisible asset. In the case of ERC-721, there can only be one token with a given token ID.

  The ability to have both fungible and non-fungible tokens within the same contract is one of the key advantages of ERC-1155, as it allows for greater flexibility in designing decentralized applications that require both types of tokens.