Fungible Token Standard

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Pronunciation

[fuhn-juh-buhl toh-kuhn stan-derd]

Analogy

Like a standard template for printing identical coupons. Each coupon (token) printed from this template is exactly the same and can be used interchangeably for the same value or purpose as any other coupon from the same batch, regardless of its serial number.

Definition

A technical specification or interface that outlines a common set of rules and functions for creating and managing interchangeable tokens on a specific . Tokens created under this standard are identical and can be swapped one-for-one.

Key Points Intro

Fungible standards ensure interoperability and ease of management for interchangeable tokens.

Key Points

Defines tokens that are mutually interchangeable.

Specifies standard functions for transfer, balance inquiry, and approval.

Enables compatibility with wallets, exchanges, and dApps.

ERC-20 on Ethereum is the most widely adopted example.

Example

The ERC-20 standard on dictates how smart contracts should manage fungible tokens. Any that implements the ERC-20 standard (like USDT, UNI, or AAVE) can be stored in any , traded on any ERC-20 compatible decentralized exchange, and integrated into any dApp that supports the standard.

Technical Deep Dive

A fungible token standard is an (ABI) specification that smart contracts must adhere to. For ERC-20, this includes defining required functions like `totalSupply()`, `balanceOf(address)`, `transfer(address, uint256)`, `transferFrom(address, , uint256)`, `approve(address, uint256)`, and `allowance(address, )`, as well as events like `Transfer` and `Approval`. Implementing these functions ensures that different tokens behave predictably and can interact with standard infrastructure.

Security Warning

Properly implementing a fungible token standard in a is critical. Errors or vulnerabilities in the contract's code (e.g., in the transfer logic or approval mechanism) can lead to critical security issues, such as unauthorized transfers or inflated supply, even if the standard itself is sound.

Caveat

Compliance with a fungible token standard ensures technical compatibility but does not guarantee the security, value, or legitimacy of the or the project that issued it. A malicious project can issue an ERC-20 ; the standard doesn't vet the issuer.

Related Terms

Blockchain & Cryptocurrency Glossary

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