From ERC20, 721, 1155 to 3525: Detailing the Path of RWA Towards Mass Adoption in Web3

Since the emergence of blockchain technology in 2008, the cryptocurrency market has developed rapidly. However, the total market capitalization of the entire cryptocurrency market is still lower than that of Apple Inc., and Web3 lacks practical applications in the real world. Nevertheless, Citibank's recent research report "Money, Tokens, and Games" may change this situation. The report views the tokenization of real-world assets (RWA) as the main narrative for the next phase, believing it will drive the blockchain and Web3 industry to have 1 billion users and could lead to economic activities worth trillions of dollars.

In the grand narrative of RWA, the ERC-3525 standard demonstrates immense potential. As a semi-fungible token (SFT) standard, it combines the characteristics 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. In this way, ERC-3525 is expected to promote the development of RWA and drive 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 to understand the differences among these token standards. It will then explore the digital world modeling concept of ERC-3525 from three levels, and finally, look forward to the application areas of ERC-3525 that are worth paying attention to in the future.

Background Introduction

Before introducing ERC-3525, let’s briefly introduce EIP and ERC:

EIP stands for Ethereum Improvement Proposals(, which is a framework for the Ethereum community that allows anyone to propose improvements or updates to the Ethereum network. These proposals can involve the Ethereum protocol itself, related client APIs, or 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, interface definitions, etc. ERC typically provides standard templates for Ethereum application developers to ensure that different projects and applications have shared 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 on December 1, 2020, designed by core members of the Solv Protocol, and supported by core developers of the Ethereum community. From the initial proposal to final acceptance by the community, it took 20 months, during which several drafts were improved, and it was officially passed as an ERC token standard in September 2022. As an Ethereum standard created by a team of core members for the Chinese community, ERC-3525 has ushered in a new wave of attention in the industry.

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

ERC-3525 is a semi-fungible token standard (SFT). Many people may initially think that ERC-3525 is a hybrid of ERC-20 and ERC-721, but in reality, ERC-3525 is a foundational universal standard that has overwhelming advantages over ERC-20, ERC-721, and ERC-1155 in certain areas. Next, let's understand ERC-3525 by comparing the key components of other token standards ( while ignoring names, symbols, and other attributes ), along with their advantages and disadvantages.

( ERC-20

ERC-20 is one of the most widely used token standards on Ethereum, meaning fungible tokens where each token is equal in function and value, with no differences. This is why they are referred to as "fungible." Stablecoins are an important example of ERC-20 applications, 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 )Address### can be associated with a balance (Value), which represents the number of tokens held by this address; all balances are the same with no distinction.

Feature Advantages: ERC-20 tokens correspond to interchangeable assets, just like traditional currencies or shares, making ERC-20 very useful in many applications, such as representing shares of a company or serving as trading pairs on decentralized exchanges ( DEX ). ERC-20 is also widely used in DeFi applications, such as lending platforms and liquidity mining, and ERC-20 can be non-integer split, allowing you to own 0.5 of an ERC-20 token.

Limitations: Since ERC-20 tokens are completely interchangeable, they cannot be used to represent unique or non-fungible assets, such as artworks or collectibles.

( ERC-721

When it comes to ERC-721, we must mention non-fungible token )NFT, Non-Fungible Tokens ###. Well-known NFTs such as Bored Ape and Azuki belong to the ERC-721 standard, which describes how non-fungible tokens should be 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 an ideal choice for representing unique digital or real-world assets such as art, real estate, collectibles, etc. The earliest NFT, CryptoPunk, was not based on the ERC-721 standard but on the ERC-20 standard; however, the emergence of CryptoPunk spurred the creation of ERC-721, laying the foundation 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 this ID attribute, and each ID is associated with an owner.

Key Advantages: ERC-721 tokens are non-fungible, meaning each token is unique. This makes them particularly suitable for representing unique items or assets, such as artworks, collectibles, real estate, or other unique assets. It also gives them significant value in the creation and trading of digital art and other unique digital assets.

Limitations: Due to the non-fungible nature 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 are indivisible; you cannot own 0.5 of an ERC-721 token.

( ERC-1155

ERC-1155 is a multi-token standard that combines the features of ERC-20 and ERC-721, aiming to handle multiple 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. This means that if you want to create a new token, you need to deploy a new contract, which can lead to redundant code and expensive gas fees. Moreover, complex interactions may 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 a game, you can use ERC-1155 to create different types of weapons ) that are non-fungible ###, such as sticks, knives, and guns. However, within each type of weapon ( that is non-fungible ), every individual weapon is fungible; for instance, knife #1 and knife #10 are exactly the same ( fungible ), but knives and guns are different ( non-fungible ).

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

Feature Advantages: ERC-1155 tokens can represent both fungible and non-fungible assets simultaneously, making them very useful in a variety of applications. For example, a game might use ERC-1155 tokens to represent the type of equipment for players ( non-fungible ) and the quantity of equipment ( fungible ).

Limitations: Although the flexibility of ERC-1155 tokens makes them useful in many cases, this flexibility can also make understanding and implementing ERC-1155 more complex than ERC-20 or ERC-721, and it cannot represent assets that can be partially exchanged, such as bonds or futures, as well as not being able to perform non-integer splits; you cannot own 0.5 of an ERC-1155 token.

( ERC-3525

ERC-3525 is a semi-fungible token )SFT, Semi-fungible Token ( standard, which combines the characteristics 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. It has greater composability compared to other token standards. ERC-3525 represents a modeling concept of the digital world and can be understood from three levels: Splittable and combinable super NFTs, universal digital containers, and visualized smart contracts.

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 manner compatible with ERC-721. Additionally, each token also contains a value attribute, representing the quantity nature of the token, similar to the "balance" attribute of ERC-20 tokens.

The address represents an address that owns Slots and IDs. Each address can have any number and type of IDs and Slots. What sets it apart is the Slot attribute, where the Values of different IDs with the same Slot can be transferred and exchanged, while transfers and exchanges cannot occur between different Slots. One Slot can have many types of IDs, while different IDs can only have one Slot.

The key point of ERC-3525 lies in Slots. Simply put, a Slot represents a category, and there can be many IDs under the same Slot. Although each ID is different and has its own Value, different IDs under the same Slot can be considered as the same and can be exchanged, combined, or split. For example, take membership cards: suppose there are two Slots, one for KFC and one for McDonald's. Each KFC and McDonald's membership card has a different ID representing different people's membership cards, such as Satoshi Nakamoto's card and Vitalik Buterin's card. Each person's membership card has a Value that represents their points.

In the same Slot, which is the KFC membership card, the points in the Satoshi card and the points in the V God card are regarded as the same thing. Satoshi can transfer points to the V God card and can also receive points sent from the V God card. Satoshi can also split the points in his points card into two different IDs, the main card and the sub-card ), allocate points Value( arbitrarily, and can merge the main card and the sub-card back together.

In different Slots, KFC and McDonald's, being two different companies, cannot transfer points from KFC to McDonald's points card, and thus do not possess the transferability, exchangeability, and combinability between Value and ID.

Advantages: ERC-3525, due to its more complex structure, can be used to represent various complex digital structures such as securities, bonds, options, futures, swaps, insurance policies, membership cards, etc. Furthermore, because it is a semi-fungible token, each token can have its own characteristics and rules, making this standard very flexible and powerful. Additionally, due to the existence of Slots, ERC-3525 can facilitate 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 leads to a higher threshold for understanding. Due to the existence of Slots, there are more centralized characteristics in its technical structure. The development difficulty is higher.

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