Differences Between ERC20 and ERC223 Tokens Explained

As if understanding Bitcoin wasn’t difficult enough, Ethereum adds an entire new level of complexity to the equation.

Even if you have a solid technical background, it’s about to take some time and independent research prior to everything makes sense, unless you are a genius anyway.

With that said, a basic understanding of how Ethereum works can genuinely make it simpler to understand cryptocurrencies in general.

You see, Ethereum is a decentralized platform upon which smart contracts can be written and executed. It’s the base layer that supports hundreds of dApps.

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What is an ERC-20 Token?

The ERC-20 standard used in smart contracts contains just 6 basic functions that make the token. The code is too simple that you don’t have to have any computer science knowledge to comprehend it.

In the first place, there is the totalSupply() function, that determines the total amount of tokens that will be created to be exchanged within a given project’s token economy.

Thereafter, there is the transfer() function used for the initial distribution of tokens to user wallets. This function is the major reason that ERC-20 tokens have become so popular for ICOs, since it makes it incredibly easy to send tokens to the investors when the ICO has been completed.

The transferForm() function is something that then enables token holders to exchange tokens with one another after the initial distribution.

Supposing that you wish to send some BAT to a friend, this function takes your Ethereum wallet address, the recipient’s Ethereum wallet address, and the amount being sent, and then executes the transaction.

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What is an ERC-223 Token?

While the ERC-20 standard is very useful, it is far from perfect. For instance, one particularly bad design flaw with ERC-20s made it possible for the tokens to be lost when people mistakenly send them to a smart contract utilizing the process that they would use for sending tokens to an ordinary wallet.

This is something that has dependably resulted in a loss of over $3 million worth of ERC-20 tokens to date.

ERC-223 addresses the design flaw by allowing users for transferring tokens to blockchain smart contracts as well as wallets with the same function.

In addition, ERC-223 tokens improve on the efficiency of ERC-20s by making transfers require only 1 step, instead of 2, meaning that ERC-223 token transfers need only half the Gas as compared to ERC-20 transfers.

On top of that, ERC-223 tokens are backwards compatible with the top wallets for ERC-20 tokens, which means that they maintain all the original functionality while solving those bugs mentioned above.

As a result of these advantages, the ERC-223 standard may someday supplant ERC-20 as the most widely used standard for Ethereum tokens.

However, the most Ethereum wallets don’t yet support ERC-223 tokens. Thus, the adoption by project developers has been slow.

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Kapil Gauhar

Kapil Gauhar is the founder of Blogger’s Gyan. He is a Passionate Blogger, a Big Thinker and a Creative Writer. His passion for doing friendship with words and letting people know about the wonders of the Digital World is what motivates him to take writing as a career.