Recently, someone asked me what ERC20 is and the difference with ERC721, so I might as well organize my understanding.

Honestly, if you're interested in evaluating ICO projects or understanding how crypto assets work, these two concepts are definitely worth taking the time to learn. Many people don't even look at the white paper details before investing and end up getting cut, not knowing what happened.

First, let's talk about what ERC20 is. ERC actually means Ethereum Request for Comments, which is a way for Ethereum developers to solicit feedback and establish standards. ERC20 is currently the most mainstream token standard on Ethereum, and most tokens follow this specification. You can think of it as currency—one token is no different from another, and a wallet only needs to record the amount. Projects like Waltonchain and Storj issue tokens based on the ERC20 standard.

The ERC20 standard supports smart contract operations. A complete ERC20 token needs to have basic features like token name, abbreviation, smallest unit, total supply, balance inquiry, transfer functions, approval mechanisms, etc. This standard makes it easy for entrepreneurs to issue tokens, and users to use tokens for blockchain services, which is very efficient.

So what about ERC721? In September 2017, Dieter Shirley, the CTO of Axiom Zen, officially proposed the ERC721 standard, which is another specification for handling non-fungible assets. Simply put, ERC20 tokens are interchangeable, like currency; but ERC721 tokens represent unique, non-fungible assets, such as houses, artworks, and similar items.

The core innovation of ERC721 is that each token has a unique ID, allowing ownership to be tracked via blockchain. Axiom Zen's CryptoKitties game was the first project to apply the ERC721 standard, where each cat is a unique, non-fungible digital asset.

If you want to understand what ERC20 is and its limitations, you'll see why ERC721 is important. ERC20 standard became mainstream early on, but it only suits interchangeable assets. As applications expanded, the market found that many non-fungible assets also need digitalization—like collectibles, game items, virtual goods, and even real-world property and stock ownership. ERC721 was created to fill this gap.

On a technical level, ERC721 is compatible with some ERC20 functions, such as token name, abbreviation, total supply, etc., but adds features for ownership records and transfers. In ERC20, you only need to record how many tokens an account has; but in ERC721, the system must record each token's ID and owner separately.

The future has huge potential. As ERC721 becomes more popular, we might see more applications based on it—like digital collectible markets, virtual game asset trading, and even on-chain proof of ownership for real assets. Using ERC721 tokens to verify ownership of houses, land, stocks, and to track and trade them could create a whole new property rights market.

In simple terms, understanding what ERC20 is isn't difficult, but grasping the difference between ERC20 and ERC721 is key to understanding the development direction of the Ethereum ecosystem. If you're going to invest in crypto projects, these foundational concepts are essential to master.