What are ERC-20 Tokens?

What are ERC-20 Tokens?

In short, ERC-20 is a set of standards that allow developers to create their own tokens to build on the Ethereum network. Ethereum decided to create a standard that sets rules to which all tokens in the network must adhere, and so ERC-2.0 was born.  

Ethereum has set standards known as ERC-20 that allow developers to create their own tokens on the Ethereum network. While there are other Ethereum token standards, ERC-20 offers developers of wallets, swaps and apps simplified access to the blockchain ecosystem.    

ERC-20 tokens could play a major role in making many cryptocurrencies and tokens more accessible to the mainstream, given their simplicity and potential interoperability with other Ethereum token standards.   

One of the most important innovations in the development of Ethereum-based tokens is the ERC-20 protocol standard. The ERC-20 tokens developed by Fabian Vogelsteller in 2015 are a technical standard for smart contracts on the Ethereum blockchain and token implementations. The standard Ethereum token ERC-20 is the blueprint for creating fungible tokens that are compatible with the wider Ethereum network.  

In reality, Ethereum is the parent currency of the Ethereum platform but ERC-20 is a standard-specific token type. Although Ethereum has a larger market capitalization than Bitcoin, it is used in different ways, and its blockchain is based on the use of tokens to buy, sell, and trade. Others have used the ERC-20 token to create more ERC-2.0 tokens, each with a different token name.   

There are fungible tokens on Ethereum for various use cases and applications, such as utility tokens that can be created by developers using ERC-20 as reference. The difference is that ECR-20 tokens work like Bitcoin, which runs on their own blockchain but are issued over the Ethereum network.   

The ERC-20 standard describes six functions that maintain the functionality and features of the Ethereum-based digital tokens. Simply put, it defines a number of functions that can be implemented on ERC-20 tokens to enable integration with other contracts, wallets, and marketplaces. The standard provides a basic format for transferring and interacting with ERC-20 tokens through different wallets and allows for storing, transferring, and managing fungible tokens to Ethereum.   

Since the ERC-20 protocol is a standard, any ICO token that implements Ethereum’s Smart Contract needs to reinvent the wheel and implement its own version of the basic functions, but useful tokens can be implemented to enable trading. 

The ERC-20 token provides an overarching standard that includes rules that all Ethereum network tokens must comply with. This technical standard is used to issue and implement tokens on the Ethereum blockchain and describes a common set of rules which must be followed for tokens to properly function in the Ethereum ecosystem. Tokens that are to be used on the Ethereum platform must follow a list of standards that can be traded, shared, and other tokens transferred among crypto wallets.  

ERC-20 is a token standard that outlines the specifications that all tokens must follow to work properly on the Ethereum blockchain. It is a standard that applies to the creation of smart contracts and tokens for the Ethereum network. It has become a technical standard because it is the technical standard used by smart contracts, Ethereum token implementations, and contains a list of rules that all Ethereum-based tokens should follow.  

ERC-20 is the official protocol that proposes improvements to the Ethereum Network (ETH) and can be understood as the standard for all tokens created on the Ethereum blockchain. ERC-20 is a standard that defines how ECR-20 tokens should be transferred to the blockchain and how their respective delivery addresses and balances should be recorded. The ERC-20 protocol is an Ethereum Request for Comment (ICO) 2.0 proposal by Fabian Vogelsteller in November 2015 as a token standard for the implementation of the API for smart contracts tokenized. 

ERC20 is a guide to rules and regulations that will help create a blueprint for smart contracts based on Ethereum to create their tokens to keep it simple. Before the ERC-20, Ethereum asked for comments on a formal Ethereum improvement proposal to introduce smart contract and token standards for public blockchain.  

According to a dynamic list from the Ethereum data provider Etherscan, there will be 829 projects based on the ERC-20 token standard by December 2020 and over 350,000 token contracts. While ERC-20 remains the definitive Ethereum token standard, several new token standards are currently under development. In addition to ECR-20 and Ethereum, several other standards have emerged since ERC 721 that focus on different types of tokens such as non-fungible tokens.

If a smart contract wants to use an ERC20 token, it must follow the rules of the ERC-20 standard. Developers and users can rely on the tokens created with the standard to interact with hundreds of other ECR-20 tokens and services they accept. Let us see why this standard is so important, and to make things simple, we will review the icon in an Ethereum contract. 

You can create a token exchange system that allows you to add new tokens to your platform as soon as they are released as long as they follow the standard ERC-20. Ethereum (ETH) is not sent for transactions with ERC-20 tokens but is used to cover gas costs and fees used by miners on the Ethereum network to add new blocks to the Ethereum blockchain that contain ECR-20 transactions. Since ERC-2.0 tokens are used on the blockchain, your Ethereum wallet cannot handle your ETH without ERC21.0, so Ethereum ETH is a full-fledged asset for you. 

The ERC20 Standard solves a key problem: blockchain-based marketplaces and crypto wallets require a single standardized set of commands to communicate with the range of tokens they manage. The specification for tokens is as follows: developers and entrepreneurs must build new tokens that interact with the Ethereum ecosystem and decentralized apps to work on the Ethereum blockchain. Currently, 70-80% of the more than 200,000 ERC-20 compatible tokens on the blockchain are testing tokens in development, with a few recorded transfers that you can track on CoinMarketCap.