So you’ve dived into the world of crypto, and stumbled across a bunch of different terms starting with “ERC”. ERC stands for ‘Ethereum Request for Comment’. There are ERC-721s, ERC-20s (amongst others), but the focus of this blog are ERC-1155s. To understand the difference between each of these, you have to first understand what a token standard is, and what it means. Let’s get started!
What is a token standard?
Token standards are defined as the set of rules that allow the development of cryptocurrency tokens on different blockchain protocols. These rules dictate how different types of tokens work on a particular blockchain, and how they interact with smart contracts. At the time of writing, the most popular token standards on the Ethereum blockchain are ERC-20s, ERC-721s and ERC-1155s.
ERC-20s: ERC-20 is the technical standard for fungible tokens created using the Ethereum blockchain. A fungible token is one that is interchangeable with another of its kind, maintaining the same value regardless of which token you hold. As an example, WETH as a token is an ERC-20. 1 WETH, with no difference in value or properties.
ERC-721s: ERC-721s are the exact opposite of an ERC-20, in that they are non-fungible. This means that no two ERC-721s are the same, making each token matching this standard unique. The use case you may be most familiar with is NFTs.
ERC-1155s: Imagine if you could combine the best of both worlds and had the ability to create either fungible or non-fungible tokens within the same standard? That’s exactly what ERC-1155s aim to provide.
What makes ERC-1155s so appealing?
During the NFT summer of 2021, costs were prohibitively high to interact on the Ethereum mainnet with any ERC-721. As an NFT trader, you needed to individually action multiple transactions for each NFT, costing you a lot in gas fees. ERC-1155s allow for batch transferring, where multiple assets can be transferred in one transaction. This limits network congestion and lowers transaction costs. That in itself is an improvement on previous token standards. However, that’s not all ERC-1155s offer. By providing the ability to create fungible or non-fungible tokens in the same environment, this makes the conversion of fungible tokens to NFTs (or the reverse) simple.
Let’s use Cryptopunk#1 as an example, and pretend that it was an ERC-1155 instead of an ERC-721: There will only ever be one non-fungible version of Cryptopunk#1, but ERC-1155s give users the ability to trade fungible copies of the same asset in tandem. The non-fungible version holds higher value, as it is one-of-a-kind, whereas the fungible copies increase accessibility on the user’s side.
How are ERC-1155s taxed?
The tax treatment of ERC-1155s will come down to the rules and guidelines of your specific jurisdiction. If your tax authority hasn’t yet given specific guidance on the treatment of ERC-1155s, you could assume that they will have the same rules applied to them as other crypto assets in your region. As an example, in Australia, any token (whether an ERC-721, ERC-20 or ERC-1155) is treated as a capital gains tax (CGT) asset. As a result in Australia, disposing of an ERC-1155 token (e.g. by selling one or trading one) would trigger a capital gains tax event.
Does Summ support ERC-1155s?
We do indeed! Currently we have ERC-1155 token support in-app for Arbitrum, Avalanche, Binance Smart Chain, Ethereum, Fantom and Polygon. Using our platform, you’re able to track minting and selling ERC-1155s on any of these networks, as well as converting an ERC-721 to an ERC-1155 (or vice versa).
Disclaimer: The content of this guide is for general informational purposes only. It is not legal or tax advice. Viewing this guide, purchasing or using Summ (formerly Crypto Tax Calculator) does not create an attorney-client relationship or a tax advisor-client relationship.
The information in this guide represents the opinions of experienced crypto tax professionals; however, some of the topics in this guide are still subject to debate amongst professionals, and tax authorities could ultimately release guidance that conflicts with the information in this guide. The information contained in this guide is based on the authors’ interpretation of current guidelines. Changes to the guidelines may be retroactive and could significantly alter the views expressed herein. Therefore, use this information at your own risk and for information purposes only.
Consult a professional regarding your individual tax or legal situation.
The information provided on this website is general in nature and is not tax, accounting or legal advice. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider the appropriateness of the information having regard to your own objectives, financial situation and needs and seek professional advice. Summ (formerly Crypto Tax Calculator) disclaims all and any guarantees, undertakings and warranties, expressed or implied, and is not liable for any loss or damage whatsoever (including human or computer error, negligent or otherwise, or incidental or Consequential Loss or damage) arising out of, or in connection with, any use or reliance on the information or advice in this website. The user must accept sole responsibility associated with the use of the material on this site, irrespective of the purpose for which such use or results are applied. The information in this website is no substitute for specialist advice.
