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 1. MetaMask
 2. Managing my Tokens




USER GUIDE: TOKENS

Updated 1 month ago
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IF YOU'RE NEW TO BLOCKCHAINS AND THE DECENTRALIZED WEB, TAKE A READ THROUGH OUR
PRIMER; THE CONCEPTS OUTLINED THERE WILL FORM THE BASIS FOR THE FOLLOWING
DISCUSSION.

It is important to remember that MetaMask isn't just used on the Ethereum
mainnet. It's true, that's where a lot of the most popular applications are, and
as the network scales, that should continue to be the case, but from the
beginning, MetaMask has been designed to be open and modifiable to the world.
This means it can be used on any Ethereum-compatible blockchain network — and
there are a lot of those.

With that in mind, this article will seek to give an explanation regarding
tokens that acknowledges this multi-chain reality, especially given how much
activity happens on non-mainnet chains through MetaMask.

One of the most basic features of blockchain technology is the ability to track
assets moving between parties; it is for this reason it's also
called distributed ledger technology: in the end, it's all a series of ledgers
being synced across the network. How do we track those assets? Well, they need
to be quantified in some way: enter tokens.

 


NETWORK-NATIVE TOKENS

Most blockchain networks, be they fully public or otherwise, utilize some sort
of incentivized consensus mechanism to pay for the computing power of the
network, and generally there is a default token, or "native currency", that the
network uses for those payments. Ethereum mainnet uses ETH for this purpose, but
each network will have its own standard. This is important for the user because
unless they hold some amount of the network's native currency, they may not be
able to pay for transactions, gas fees, etc. Sometimes network-native tokens
have significant differences from other tokens on the network (more on the
quirks of ETH below), but in general, they're what we call fungible tokens:


 


FUNGIBLE TOKENS

Fungible tokens are those which are not unique. They are interchangeable, just
like a metallic coin or a paper bill of currency. True, on most networks they're
more traceable than a paper banknote — remember, there's a ledger of what tokens
go where — but they're intended to be used as a medium of exchange for one
purpose or another. The network currency tokens, described above, are an example
of fungible tokens.


 


FUNGIBLE TOKEN STANDARDS

ERC-20 TOKENS

As blockchain networks have developed, standards have been put in place as to
how tokens should be programmed; how they act, programmatically speaking. On the
Ethereum network, many fungible tokens conform to a standard called ERC-20. So,
your BNB, USDT, LINK, DAI tokens, to name a few, are ERC-20 tokens.

Let's say you're on Ethereum mainnet, and you just bought yourself a few tokens
of a widely-recognized and traded token. You wait for the swap to settle, and
there in your MetaMask wallet, your tokens appear. Magic! ...Not quite.

MetaMask doesn't automatically catalogue and load every possible token into a
list just in case you buy some of them — at time of writing, there are nearly
650,000 different ERC-20 contracts out there. It's impossible to keep up.
Instead, MetaMask keeps a list of the most popular tokens, and automatically
detects those; but no worries, if you get one that's less common, you can easily
add it manually.


AND HERE'S THE REALLY INCREDIBLE PART — YOU CAN USE METAMASK ON ANY
ETHEREUM-COMPATIBLE NETWORK, WITH ANY ETHEREUM-COMPATIBLE TOKEN, FOLLOWING THE
SAME PROCESS.

Why? Simply put, because Ethereum has served as a roadmap and a
standard-creating paradigm for blockchain networks. To put it another way, most
people building networks want to make sure that their networks are compatible
with Ethereum. So that ends up meaning that MetaMask will work just the same on
a new network as it does on Ethereum mainnet.


METAMASK ISN'T JUST A WALLET, AND IT ISN'T JUST YOUR GATEWAY TO THE ETHEREUM
NETWORK; IT'S YOUR PASSPORT TO THE DECENTRALIZED MULTICHAIN MULTIVERSE.

That said, even when travelling through wormholes, you've got to do it right:
make sure you use the right bridges and portals. Just because you have tokens in
your MetaMask wallet on a different blockchain doesn't mean you can just send
them to your MetaMask wallet on the Ethereum blockchain. If you do, you can lose
them forever. We have a few helpful guides to bridging tokens between specific
networks in our Network Profiles section. 

 

ERC-777 TOKENS

This alternate standard was offered as an improvement over ERC-20 tokens, in
that it has greater capabilities, particularly the ability to notify smart
contracts or wallets when an ERC-777 token is transferred to such an entity. Of
course, this means that the receiving entity has to be programmed to receive and
work with that notification, which many are not. There are a number of ERC-777
tokens out there, but the ERC-20 standard by far holds predominance.

 

WRAPPED TOKENS

While these standards have existed for some time, they did not exist at the
inception of Ethereum. As such, ETH itself, Ether, the native currency of the
Ethereum mainnet, is not ERC-20 compliant. This oddity has led to the creation
of Wrapped Ether, or WETH: an ERC-20 token that holds an equivalent value of the
ETH for which it is swapped, but with ERC-20 functionality.

The wrappers don't stop there, though: wrapping a token is a way of bringing a
token from one network to another, like wrapped Bitcoin or MATIC tokens on
Ethereum mainnet. 

 

STABLECOINS

One prominent class of ERC-20 tokens are so-called 'stablecoins', that is,
fungible tokens whose value per token is pegged to some external value. Many are
pegged to fiat currencies, or commodity markets, or high-value items like gold.

Stablecoins have some considerable nuances and complexities associated with
them, due to the fact that in many jurisdictions, they are required to be
collateralized; in other words, if you're issuing a coin that is pegged to the
US Dollar, you may need to hold in reserve one US Dollar for every coin you
issue. Due to these requirements, some stablecoins are controlled by more
centralized entities.

Another approach to collateralizing a stablecoins is through depositing value in
other cryptocurrencies. This represent a more decentralized option, which some
consider closer to the ethos of Web3. Due to the volatility of cryptocurrencies,
a crypto-collateralized stablecoin may need to hold in deposit a higher amount
of value as collateral than a fiat-backed stablecoin.

 

REFLECTION TOKENS

The vast majority of users get into DeFi to grow their bags — often through
staking, yield farming, liquidity mining, and other complex mechanisms.
Reflection tokens are set up to scratch this itch for passive income without the
holder ever having to engage in any DeFi activities: you're simply awarded ever
more tokens just for having them in your wallet. 

These payments — orchestrated by a smart contract — are proportional to the
quantity of tokens the user holds, and are financed through what amounts to
taxation on transactions. The advantages are obvious: as the incentive to hold
is so strong, the token is protected from large-scale sell-offs. You're also
free to use the token in DeFi if you want to, generating yields on top of the
redistributive payments. 

Reflection tokens are a novel concept, with many current examples having been
around for too short a time to derive any conclusions about their long-term
sustainability or viability. As always with new crypto projects, DYOR and stay
safe. 

 

ELASTIC SUPPLY / REBASE / ALGORITHMIC TOKENS

A fascinating and emerging technology, elastic supply financial products seek to
eliminate price volatility. Instead, these products experience supply
volatility.

Like a stablecoin, many (not all) elastic supply tokens have a 'target price'
that references some external value, such as a fiat currency. But instead of
being pegged 1:1 in quantity with that external value point, the quantity of
tokens expands and shrinks to maintain each holder's value. In theory, this
fluctuation manages changes in demand, or changes to an external price (a fiat
currency, for example) on which the value of the asset is based.

More simply: an elastic supply token will adjust, or rebase, the number of
tokens allocated to each holder depending on market demand for the token as well
as the market value of the fixed external value, in theory, maintaining a steady
value.

If you hold rebase or elastic supply tokens, you may see the quantity of that
token go up and down in your wallet. 

At least, that's the idea; it doesn't always work that way. Elastic supply
products are complex financial instruments in which you should only invest if
you truly understand how they might behave.

Many elastic supply tokens are designed to be non-collateralized stablecoins,
thus offering a more decentralized, yet stable, option. However, other elastic
supply tokens are designed specifically to offer compounded gains on positive
rebases, but the reverse will also be true: under a negative rebase, your losses
would also be compounded.

To give you a made-up example: you buy 100 tokens, and demand grows; your 100
tokens are rebased to 120 tokens, and what's more, the value of them is greater
because there's more demand; you've experienced a 30% return on your
investment--at least, temporarily. Now the flip side: if lots of holders of your
elastic token are selling, maybe your 100 tokens are rebased to 80, and the
value has dropped; you've suffered a 30% loss.


This information is offered by way of example and education, and as always with
MetaMask resources, in no way constitutes investment advice. Do your own
research and understand the projects in which you are participating.

 


NON-FUNGIBLE TOKENS (NFTS)

What's an NFT, you ask? Well, it's there in the name. In contrast with ERC-20,
network currency, or other fungible, currency-like tokens, non-fungible tokens
are meant to be unique. There may be a series of them, but they are not
interchangeable, one for another; each one is different. For this reason, they
have been the subject of amazing innovation and creativity since the inception
of Ethereum mainnet; one of the first big surges of usage and adoption of
Ethereum was through CryptoKitties, an NFT-based videogame in which players
breed and collect unique cats, each one of them tokenized as an NFT.



NON-FUNGIBLE TOKEN STANDARDS

ERC-721 TOKENS

Similar to the dynamic between ERC-20 and ERC-721, there are two main NFT
standards, and the first and older of the two is more dominant--although there
are plenty of ERC-1155 tokens out there as well. This is the standard that's
been used to create CryptoKitties, the Ethereum Name Service (ENS), CryptoPunks,
Cool Cats (so many cats)--the list goes on.

 

ERC-1155 TOKENS

Developed subsequently to the 721 standard, the ERC-1155 standard is incredibly
powerful and while used in NFT collections, may come to be used in much more
complex and nuanced ways. A smart contract that is coded according to ERC-1155
can issue a number of both fungible and non-fungible contracts. This could be
particularly useful in developing a video game, for example: imagine a video
game world where the users need life tokens, or currency tokens to spend in the
game, which would be fungible; however, the characters themselves could be
represented by non-fungible tokens, each one of them unique. With ERC-1155, all
of this could be possible with a single smart contract.

 

SIDE NOTE: POAPS

As you spend more time in Web3, you may hear about POAPs, especially if you
attend events related to the ecosystem (in person or virtually). POAP is an
acronym that stands for Proof Of Attendance Protocol; it's essentially an NFT
that is deployed as a sort of badge, showing that you attended a given event. In
other words, in addition to any value they may have in monetary terms, they
carry bragging rights, too.

If you're interested in using POAPs at your own event, ConsenSys' own Clemens
Wan has written an excellent walkthrough.

 


SUMMARY

Remember, all the types outlined above are the Ethereum-native standards. Other
networks, if they develop tokens that use Ethereum standards as a blueprint, may
refer to them in similar, but different ways, for example keeping the numbers
but changing the letters: XYZ-20 tokens, ABC-721 tokens.

Tokens can store an incredible amount of real-world value. Read more about how
to keep that value safe here.

 


FAQS:

NFT tokens in your MetaMask wallet

How to find a token contract address

How to display tokens in MetaMask

Adding and sharing ENS / .eth address tokens in MetaMask

How to remove a token

A token is missing from my wallet

How to check my wallet activity on the blockchain explorer






ARTICLES IN THIS SECTION

 * User Guide: Tokens
 * Token safety practices
 * How to externally verify that your balance is correct



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