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Building Onchain: Standards & Tools

Smart contract fundamentals, blockchain infrastructure, and standards for developers

Smart Contract Fundamentals

A smart contract is a self-executing program stored on a blockchain that automatically enforces the terms of an agreement when predefined conditions are met. Because smart contracts run onchain, they operate without intermediaries, making them a foundational building block of onchain financial infrastructure, from tokenized assets and stablecoins to lending protocols and governance systems.
Financial institutions are increasingly using smart contracts to automate and secure core financial operations onchain. Common use cases include asset tokenization, stablecoin issuance, DeFi lending, onchain governance, and settlement infrastructure. As traditional finance moves onchain, smart contracts are becoming critical components of the next generation of digital assets and financial services.

Token Standards

A token standard is a set of rules and interfaces that define how a token behaves on a blockchain network. Standards ensure that tokens are interoperable, meaning they can be recognized, transferred, and integrated by wallets, exchanges, and other smart contracts without requiring custom implementation for each new token. On Ethereum and EVM-compatible networks, token standards are defined through the Ethereum Request for Comments (ERC) process, which allows the developer community to propose, discuss, and ratify new standards.
A fungible token is interchangeable with any other token of the same type, one unit is identical in value and function to any other unit, much like a dollar bill. Fungible tokens are used to represent currencies, stablecoins, governance rights, and other assets where individual units are equivalent. A non-fungible token (NFT) is unique, each token has distinct properties and cannot be exchanged on a one-to-one basis with another token of the same contract. NFTs are used to represent ownership of unique assets such as digital art, real estate, financial instruments, and identity credentials.
ERC-20 is the foundational standard for fungible tokens on Ethereum and EVM-compatible blockchains. It defines a common interface for token transfers, approvals, and balance queries, ensuring that any ERC-20 token can be integrated by any wallet, exchange, or smart contract that supports the standard. ERC-20 is the most widely adopted token standard in the blockchain ecosystem and underpins the majority of stablecoins, governance tokens, and digital assets in circulation today.
While ERC-20 established the foundation for fungible tokens, it has known limitations. The two-step approval and transfer process can result in a class of vulnerabilities where approved allowances are exploited. ERC-20 also lacks native support for certain features such as permit-based approvals, token burning, and snapshot functionality. These limitations have been addressed through extensions and successor standards. ERC-2612 introduced permit functionality, allowing approvals to be set via signed messages rather than onchain transactions. OpenZeppelin's Contracts library provides audited, battle-tested implementations of ERC-20 and its extensions, including these enhancements.
ERC-777 is a fungible token standard designed to improve on ERC-20 by introducing hooks, callback functions that notify sender and receiver contracts when tokens are transferred. This enables more expressive token interactions and eliminates the need for the two-step approve-and-transfer pattern. However, ERC-777's hooks have also been exploited in reentrancy attacks, and the standard has seen limited adoption relative to ERC-20. For most use cases, ERC-20 with appropriate extensions remains the preferred standard.
ERC-4626 is the tokenized vault standard, defining a common interface for yield-bearing tokens that represent shares in an underlying asset pool. It standardizes the way deposits, withdrawals, and share calculations are handled across DeFi protocols, making it easier to build composable financial products on top of yield-generating strategies. ERC-4626 is increasingly relevant for financial institutions building tokenized fund structures and onchain asset management products, as it provides a standardized and interoperable foundation for these use cases.
ERC-721 is the foundational standard for non-fungible tokens on Ethereum. It defines a common interface for the ownership and transfer of unique digital assets, where each token has a distinct identifier that distinguishes it from all others within the same contract. ERC-721 is used across a broad range of applications including digital collectibles, real estate tokenization, identity credentials, and financial instruments where individual uniqueness matters.
ERC-1155 is a multi-token standard that allows a single smart contract to manage multiple token types, both fungible and non-fungible, within the same contract. This makes it significantly more efficient than deploying separate ERC-20 and ERC-721 contracts for each asset type, reducing gas costs and simplifying asset management. ERC-1155 is widely used in gaming, digital asset platforms, and any application that requires managing a diverse set of asset types under a unified contract.
Account abstraction is a concept that allows smart contracts to function as user accounts on a blockchain, rather than restricting account functionality to externally owned accounts (EOAs) controlled by private keys. By abstracting the account layer, developers can build wallets and account systems with programmable logic, enabling features such as multi-signature authorization, social recovery, session keys, and sponsored transactions. Account abstraction is a significant advancement for institutional onchain adoption, as it enables security and access control models that are more compatible with institutional governance requirements.
ERC-4337 is the leading account abstraction standard on Ethereum, enabling smart contract accounts without requiring changes to the Ethereum protocol itself. It introduces a new transaction flow through a separate mempool and a set of smart contracts, including EntryPoint, Account, and Paymaster contracts, that together enable flexible, programmable account behavior. ERC-4337 is increasingly adopted by financial institutions and crypto-native projects seeking to build more secure and user-friendly onchain account infrastructure.
ERC-1271 is a standard for signature validation in smart contract accounts. Because smart contracts cannot generate cryptographic signatures the way EOAs can, ERC-1271 defines a standard interface that allows a smart contract to validate whether a given signature is valid on its behalf. This is essential for account abstraction and smart wallet implementations, as it enables smart contract accounts to participate in signature-based interactions, such as permit approvals and offchain order signing, that are common across the DeFi ecosystem. ERC-1271 was co-authored by OpenZeppelin.
Governance tokens are fungible tokens that grant holders the right to participate in the decision-making processes of a protocol or organization. Token holders can typically propose and vote on changes to protocol parameters, smart contract upgrades, treasury allocations, and other governance matters, with outcomes executed automatically onchain. Governance tokens are a core component of onchain governance systems and are increasingly relevant for financial institutions managing tokenized assets with distributed stakeholder bases.
Token standards play a foundational role in onchain governance by defining how voting rights are calculated, delegated, and exercised. ERC-20 tokens with snapshot functionality, which records token balances at specific block heights, are commonly used as the basis for governance voting, preventing manipulation through token transfers during active votes. OpenZeppelin's Governor framework, built on these standards, provides a battle-tested implementation of onchain governance that is used by leading protocols across the ecosystem.

Cross-chain token standards define how tokens can be represented and transferred across multiple blockchain networks. As financial institutions deploy onchain infrastructure across several chains, the ability to move assets between networks in a standardized and secure way becomes increasingly important. Emerging standards in this area aim to define common interfaces for cross-chain token transfers, reducing the complexity and security risk associated with bespoke bridge implementations.

ERC-7201 is a standard for namespaced storage layouts in upgradeable smart contracts. When a contract is upgraded, changes to its storage layout can corrupt existing data if not managed carefully. ERC-7201 defines a convention for organizing storage variables in isolated namespaces, preventing storage collisions between contract versions and making upgrades safer and more predictable. It is particularly relevant for financial institutions building long-lived onchain infrastructure that will require ongoing updates. ERC-7201 was co-authored by OpenZeppelin.
OpenZeppelin has been a significant contributor to the development and adoption of Ethereum token standards. The company has authored and co-authored several foundational ERCs, including ERC-1271 (signature validation for smart contract accounts), ERC-2771 (metatransactions), and ERC-7201 (namespaced storage for upgradeable contracts). OpenZeppelin's involvement in the ERC process reflects its position as a research-driven organization committed to raising security and interoperability standards across the broader blockchain ecosystem.
OpenZeppelin's Contracts library provides audited, battle-tested implementations of the most widely used token standards, including ERC-20, ERC-721, ERC-1155, ERC-4626, and ERC-4337. Each implementation is developed by OpenZeppelin's security researchers, reviewed against the latest security research, and maintained as open-source code available to the entire developer community. The library also provides modular extensions that allow developers to add functionality, such as access control, upgradeability, and governance, to standard token implementations without introducing unnecessary risk.
Financial institutions building tokenized asset programs rely on OpenZeppelin's implementations because they provide a secure, industry-standard foundation that reduces development risk from the ground up. Rather than writing token contracts from scratch, which introduces the potential for subtle vulnerabilities, institutions can build on implementations that have been audited by OpenZeppelin's security researchers, battle-tested across thousands of production deployments, and recognized as the standard across the ecosystem. This approach significantly reduces the attack surface of a tokenized asset program before any custom logic is written.

OpenZeppelin Contracts & Open-Source Tools

OpenZeppelin maintains a widely adopted open-source stack for onchain development. The OpenZeppelin Contracts libraries are the industry standard for secure smart contract development in Solidity and other languages, covering tokens, asset tokenization, DeFi, governance, stablecoins, and more. Contracts Wizard generates smart contracts interactively, Contracts MCP and Contracts Skills help developers and AI agents build secure smart contracts, and the Upgrades Plugins support upgradeable contracts. OpenZeppelin also provides operational tooling, including Relayer for onchain transaction management and Monitor for observing smart contract activity, alongside UI Builder, Safe Utils, and Access Control.

This page is general information about OpenZeppelin, onchain security, and onchain financial system. For educational purposes only, not financial, investment, legal, tax, or regulatory advice. Consult your own qualified advisors before making decisions.