What Is the ERC-20 Ethereum Token Standard?


The ERC-20 Ethereum Token Standard is a blueprint for creating fungible tokens that are compatible with the broader Ethereum network. Ethereum, or Ether, is a cryptocurrency that can be used to create a wide variety of applications, including tokens, which, unlike most traditional applications, do not require intermediate services to operate.

The ERC-20 standard has invaded almost every corner of the crypto ecosystem. A large number of popular tokens, such as the stablecoin Tether and the leading oracle service Chainlink, are actually ERC-20 tokens under the hood.

ERC-20 tokens are digital assets that can be created by anyone, but are mostly created by organizations and tech-oriented companies. Each token has its own specific use, e.g. For example, users have the right to vote on decisions that affect the future of a project, or reward customers for completing certain tasks. ERC-20 tokens are typically sold through various offers to raise capital for the underlying project early on. However, in the past, critics have argued that crypto tokens have generated too much hype and have become a vehicle for acidic investments or direct scams. According to reports, many of the projects that raised money in the first boom in coin supply in 2017 have not brought their investors any return.

ERC-20 standardizes the core functionality of every token. This means that all tokens created with this framework as well as all ERC-20 compatible services like MyEtherWallet and MetaMask are compatible with each other.

To understand how useful this is, here are some of the problems token makers encounter when building projects from scratch:

  • Intelligent contract creation: Smart contracts play an important role in determining the total supply of the token, the distribution of that supply, the issuance plan, etc. They also perform key functions such as querying bearer balances and facilitating the transfer of tokens. Writing these smart contracts is a complicated and time-consuming process and usually requires a team of experienced developers. This can be very expensive and devastating if the smart contracts are not properly coded.
  • Wallet and Exchange Support: Creating tokens without using a well-integrated standard like the ERC-20 framework requires additional work to make them compatible with third-party services like wallets and exchange platforms.


What are the characteristics of ERC-20?

  • Ether: Each ERC-20 token is provided on the Ethereum network.
  • Smart contracts: Every token function is governed by a series of smart contracts that ensure that no person or entity needs to be trusted for the crypto token to work. The code runs automatically when rules or conditions are met. For example, if you transfer a token to someone else, the user doesn’t need to trust anyone to give it to the recipient.

Each ERC-20 has several required functions that developers must implement. The main elements include:

  • totalSupply: A function that describes the total supply of a token.
  • Balance of: Shows how many tokens a specific address has.
  • Transfer: transfers ownership of a token to another user.

Please see Ethhub for more details.

What can a user do with tokens?

  • Crowdfunding: Sometimes the developers of Ethereum apps decide to use crowdfunding to raise funds for their projects. In return, investors will receive newly minted tokens at wholesale prices before the official launch.
  • Right to vote: Tokens can be used to vote on project decisions. In this case, the more token users they have, the more influence they have on each choice.
  • Represent physical objects: A token can represent ownership of assets such as gold.
  • Transaction fees: Every Ethereum transaction (including token transactions) includes the option to pay a fee. When the network is congested, a charge called gas can help get a transaction through faster. The fee is deducted from the user’s total tokens.
  • New features: Sometimes builders need a token to pay for the functionality of their projects, but the native token on Ethereum, Ether, isn’t enough for them. So you create a new token with the functionality you need.

Future of the Ethereum Token Standard?

Despite its many advantages, the ERC-20 standard is far from perfect. “Critical issues” with the standard have been used to steal at least $ 3 million, and during times of high congestion on Ethereum, transactions can take a long time to process.

Developers need to work around this and other problems with ERC-20. Developers have also long been experimenting with alternative standards such as ERC223 and ERC777 that could potentially replace ERC-20. However, ERC-20 is currently by far the most popular standard.

How many ERC-20 tokens are there?

According to a dynamic list from Ethereum data provider Etherscan, there are 829 projects based on the ERC-20 token standard and over 350,000 token contracts as of December 2020.

What coins are ERC-20 tokens?

There are a surprising number of top crypto projects built using the ERC-20 framework, including: