ERC, which stands for Ethereum Request for Comment, is a standard conveying the essential technical notes and requirements to a group of developers and users. ERC-777 is focused on providing additional functionality when dealing with tokens. While the ERC-20 token standard is still used frequently, ERC-777 aims to improve upon it while keeping backward compatibility with ERC-20 tokens.
Hooks are an improvement made to the ERC-777 token. They allow smart contracts to react to incoming and outgoing tokens in two ways:
- Hooks can send tokens to a contract and also notify that contract in a single transaction, making them more efficient. ERC-20, on the other hand, typically requires a double transaction to process both requests.
- Contracts with no hooks attached to them can’t interact with ERC-777, meaning that a sending contract will not continue a transaction if the receiving contract has not registered a hook. This protects users and individuals, as it rejects or prevents contracts that are not ERC-777, thus avoiding accidents and errors when people are transacting.
While the ERC-777 token standard improves on ERC-20, deploying it also has its downsides. Notably, it is more susceptible to malicious attacks, making it more difficult to deploy correctly. Some in the industry believe the ERC-777 standard is over-engineered, making it, in essence, a bad practise that requires more checks and due diligence.
