3. Fungible Tokens
Most people think fungible tokens are simple. One USDC equals another USDC. End of story.
Here's what they miss: fungibility isn't automatic. It's engineered into standards through deliberate technical choices that determine everything from transaction costs to ecosystem compatibility.
Watch what happens when a developer launches a token without following established standards:
MetaMask won't display it automatically. Uniswap can't list it without custom integration. Block explorers might not recognize transfers. Each exchange needs bespoke code to support trading. The token works technically but exists in isolation, cut off from the $200+ billion fungible token economy [1].
Now deploy that same token following ERC-20. Instant compatibility with thousands of wallets, dozens of exchanges, and the entire DeFi ecosystem. Zero custom integrations required. The standard makes fungibility universal across platforms.
Why Standards Define Success
Token standards aren't technical minutiae. They're the difference between a token that works everywhere and one that works nowhere.
The 2017 ICO boom proved this. Projects raised over $5.6 billion [2] by simply following ERC-20 rather than building custom implementations. Ethereum's token count exploded from hundreds to tens of thousands because anyone could deploy compatible assets in hours, not months.
But standards also create lock-in. When Solana launched SPL tokens with 400-millisecond finality [3] and sub-cent fees [4], projects still chose expensive, slow ERC-20 because that's where the liquidity lived. Network effects beat technical superiority.
Understanding these standards means understanding the trade-offs every blockchain makes between speed, cost, decentralization, and compatibility. A payment processor choosing TRC-20 for free stablecoin transfers makes different calculations than a DeFi protocol choosing ERC-20 for maximum liquidity depth [5].
Beyond Token Tickers
Your wallet shows a list of tokens with balances and prices. Clean interface. Simple numbers.
Behind each token sits an entire technical architecture. ERC-20 tokens deploy as separate smart contracts on Ethereum, each consuming permanent blockchain space. SPL tokens on Solana all run through one universal program, enabling parallel execution. BEP-20 on BSC copies Ethereum's model but runs on 45 validators instead of 900,000 [6].
These architectural differences determine real costs. An ERC-20 transfer during 2021's peak congestion: $50-100 [7]. The same transfer on Solana: $0.00025 [8]. On Tron with staked TRX: effectively free.
Users who understand these differences pay 90%+ less in fees by choosing appropriate networks. They avoid locked funds by knowing which standards work with which wallets. They evaluate new tokens based on technical fundamentals, not just marketing claims.
The Standards Landscape
Section 2 covered how tokens work mechanically: ledgers, smart contracts, wallets, transactions. Now we examine the specific standards that make those mechanics interoperable across billions in value.
The landscape splits into dominant standards and specialized alternatives. Three standards account for most fungible token activity:
ERC-20 pioneered the entire category. Every function, every interface, every pattern that makes tokens compatible emerged here. Over $200 billion in tokens follow this standard. Its success created both the ICO boom and Ethereum's scalability crisis.
SPL reimagined token architecture for performance. By centralizing token logic in one program, Solana enables 65,000 transactions per second at fractions of a penny [9]. Circle and Stripe chose it specifically for payment applications where milliseconds matter [10].
BEP-20 proved compatibility beats innovation for user adoption. Binance copied ERC-20 exactly, ran it on cheaper infrastructure, and captured billions in value from users fleeing high fees. The centralization trade-offs didn't matter to retail traders paying $0.10 instead of $10 [11].
Beyond these three, specialized standards serve specific niches. TRC-20 dominates remittances through zero-fee transfers [12]. FA2 on Tezos enables formal verification for enterprise use [13]. Algorand's ASAs simplify CBDC pilots [14]. Each solves problems the major standards ignore.
What This Section Covers
References
[1] Navigating the adoption of NFTS - https://assets.kpmg.com/content/dam/kpmg/sg/pdf/2022/10/navigating-the-adoption-of-nfts-en.pdf
[2] Startups Raised $5.6 Billion Through ICOs in 2017 - https://www.businessinsider.com/how-much-raised-icos-2017-tokendata-2017-2018-1
[3] Know Everything About Solana Program Library (400 ms block time, high TPS) - https://101blockchains.com/solana-program-library-guide/
[4] Solana (SOL) Transaction Fees, Speeds, and Limits: Everything You Need to Know - https://fuze.finance/blog/solana-transaction-fees-speeds-and-limits/
[5] Why ERC‑20‑compatible tokens plug into existing wallets and exchanges - http://docs.casper.network/1.5.X/resources/tutorials/beginner/cep18
[6] BSC Power Players: Inside the 45 Key Validators - https://academy.pandatool.org/en_US/bsc/1270
[7] Ethereum Network Growth: Gas Fees, Staking & Usage Stats - https://patentpc.com/blog/ethereum-network-growth-gas-fees-staking-usage-stats
[8] How Much Is Solana Gas Fee? - https://coincodex.com/article/24933/solana-gas-fees/
[9] Solana Development for EVM Developers - https://www.quicknode.com/guides/solana-development/getting-started/solana-development-for-evm-developers
[10] he Role of Programs in Solana’s Token Architecture - https://store.aicerts.ai/blog/the-role-of-programs-in-solanas-token-architecture
[11] BEP-20 Beginner’s Guide: Token Standard on Binance Smart Chain - https://www.gate.com/learn/articles/bep-20-beginners-guide-token-standard-on-binance-smart-chain/7511
[12] TRC-20 fees on TRON: how much does it cost to send USDT? - https://tronex.energy/blog/understanding-trc20-fees-how-much-does-it-cost-to-send-usdt-on-the-tron-network
[13] Token Standards - https://opentezos.com/defi/token-standards/
[14] Algorand’s Role in CBDCs and Real-World Asset Tokenization - https://store.aicerts.ai/blog/algorands-role-in-cbdcs-and-real-world-asset-tokenization/
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