Ethereum fans already familiar with ERC20 will be pleasantly surprised to learn a new and improved token standard – ERC777 – is quickly gaining traction. At present, the ERC20 standard is highly popular with many blockchain projects, especially when conducting Initial Coin Offerings. However, not all smart contracts are compatible with every token. Indeed, sending an ERC20 token to an incompatible smart contract ensures its non-use.
Thus, developers created the ERC777 token and made it fully compatible with ERC20-based applications. More importantly, they offset several flaws that currently bedevil ERC20 tokens. Among the most prominent are reduced transaction issues, greater loss prevention capability, further extensibility, and full customization.
Reduced Transaction Problems
Currently, ERC20 token users must solicit two transactions to connect with a smart contract. As token operators, they must first deposit or approve the smart contract. Once performed, they must then call the smart contract to employ any of its specific components. Token operators find this two-transaction process both time consuming and unnecessarily costly. As such, developers have sought to make this a more efficient and user-friendly process.
The new ERC777 tokens resolve this issue. They do so by requiring one transaction to initiate a smart contract component. This capability helps reduce both network traffic and blockchain wait times, thus providing users with faster and cheaper transactions.
Greater Loss Prevention Capability
ERC777 tokens also feature a new theft-prevention capability. Given the heavy cryptocurrency losses incurred by theft, ERC tokens will appreciate this added security layer. In essence, developers have enabled ERC777 token addresses to reject any incoming token from a blacklisted address. Such addresses might be “flagged for any reason, namely being associated with hackers, illicit activity, or non-compatibility.”
This new capability also closes the gap with well-known banking and anti-money laundering laws. As Everett Musty notes,
As blockchain dApps become more ingrained in everyday transactions, the ability of a vendor to be more confident in where payment is coming from is an essential development in on-chain KYC/AML (Know Your Customer / Anti-Money Laundering). For a technology literally built on the theory of a trustless ecosystem, any implementation allowing people to feel more confident in sending money/assets via the blockchain will likely hold tremendous positive consequences.
With greater security, ethereum tokens will engender greater confidence and overall usage.
ERC777 tokens are highly customizable as well, even more so than Ethereum. They also facilitate interaction between different applications. As this standard becomes better known, expect new crypto-based product capabilities to emerge. For instance, blockchain-based software development platforms that use this token would have the potential to unlock the next wave of game-changing applications, products, and services in a decentralized web.”
As mentioned above, ERC777 tokens are compatible with any application that also employs ERC20 tokens. Beyond being backward compatible, these tokens offer a several additional features, many of which are highly beneficial to the ethereum ecosystem. With all of the above, Ethereum investors should consider ERC777 tokens to be a superior upgrade.