Limitations of Current Standards
Challenges companies face when using ERC-20, ERC-721, and ERC-1155 on Avalanche.
The ERC-20, ERC-721, and ERC-1155 standards have become the backbone of asset creation and exchange on Avalanche’s C-Chain, Fuji Testnet, and custom L1s. However, while they ensure interoperability and simplicity, they also present important limitations that companies and developers must address when building real-world solutions.
1. Privacy Limitations
All three standards: ERC-20, ERC-721, and ERC-1155, operate on transparent ledgers.
- Balances are public: Anyone can view wallet holdings.
- Transactions are public: Every transfer amount and counterparty is visible.
- Asset ownership is public: For ERC-721 and ERC-1155, ownership history and metadata are fully transparent.
This transparency is useful for auditability but problematic for:
- Regulated financial institutions.
- Enterprises managing sensitive transactions.
- Use cases requiring trade secrecy or personal data protection.
2. Compliance Challenges
Avalanche provides speed and low costs, but these standards do not include compliance tools by default.
- No built-in selective disclosure for regulators or auditors.
- No native mechanism to restrict transactions based on jurisdiction.
- Compliance features must be built as custom layers, increasing development cost and complexity.
3. Scalability Concerns
While Avalanche’s architecture solves many scaling issues, token standards still introduce some constraints:
- ERC-20 and ERC-721: Each transfer is a separate transaction, which can be inefficient for high-volume operations.
- ERC-721: One contract per collection increases deployment and maintenance overhead.
- ERC-1155: More efficient, but not all dApps and marketplaces fully support it yet.
4. Asset Management Limitations
- Single-purpose contracts: ERC-20 can only handle one fungible token per contract.
- No native multi-asset governance: ERC-721 collections and ERC-20 tokens require separate governance or management systems.
- Limited metadata security: Metadata for NFTs is often stored off-chain and can be altered unless proper safeguards are in place.
Summary Table — Key Limitations on EVM Blockchains
| Standard | Privacy | Compliance | Scalability | Asset Management |
|---|---|---|---|---|
| ERC-20 | No privacy, public balances & transfers | No built-in compliance | One transfer per transaction | Single token per contract |
| ERC-721 | No privacy, public ownership & metadata | No built-in compliance | One contract per collection | Separate governance per collection |
| ERC-1155 | No privacy, public ownership & metadata | No built-in compliance | Batch transfers supported, but partial ecosystem support | Multi-asset capable but complex |
These limitations do not prevent successful deployments, but they create barriers for industries that require privacy, compliance-readiness, and advanced asset control.
In the next section, we will explore Real Privacy: how much privacy blockchain truly offers, why compliance is critical, and how privacy-focused standards like eERC can address these challenges in the Avalanche ecosystem.
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