ERC-20 tokens are crypto tokens designed to be used only on the Ethereum blockchain network. These tokens follow a few standards to allow them to be shared or exchanged for other crypto tokens. These tokens also follow these standards to enable transfer to crypto wallets. The Ethereum community created these standards with three optional and six mandatory rules. The optional rules consist of a token name, symbol, and decimal. The mandatory rules are the total supply, balanceOf, transfer, transferFrom, approve, and allowance. Each of these rules are explained in detail in this article. The ERC-20 standards enable developers to create smart-contract-enabled crypto tokens that can be used with other services.
History
In 2015, there were several issues plaguing Smart Contracts. Many crypto tokens were being conceived, and any crypto enthusiast could create one. However, no system enabled all new crypto tokens created or exchanged to be used by everyone on the blockchain. Every application would need its crypto token without a standardized methodology. Users would have to convert them between many hundreds of apps.
Fabin Vogelstellar proposed the ERC-20 [1] standard in 2015 to resolve the need for a standard for smart contracts on the Ethereum blockchain. He submitted the proposal through the Ethereum GitHub page as an Ethereum Request for Comment (ERC). It was assigned the designation ERC-20 as it was the twentieth comment.
What are some of the main features of ERC-20 tokens?
ERC-20 crypto tokens are only used on the Ethereum network. Some crypto tokens are designed to pay for functions and are known as utility tokens. Others are used to pay for goods and services. Some of the main features of these tokens are that they are fungible, transferable, and have a fixed supply. Fungible means that the code of each crypto token is the same. These tokens are transferable and can be sent from one address to another. A fixed supply of these tokens so that developers cannot issue more crypto tokens to raise the token supply.
How do ERC-20 tokens work?
ERC-20 is a standard protocol and not an executable program or code. The ERC-20 protocol governs the creation of new crypto tokens so that they meet all the technical specifications. A crypto token is not issued on Ethereum when it does not follow the technical standards defined by ERC-20. ERC-20 specifies the vital features that an Ethereum crypto token should have and how they function.
Read more: What is Ethereum[2]
The ERC-20 standard
Smart contracts that need ERC-20 crypto tokens have to follow ERC standards. There are nine rules; six are mandatory and three are optional. Mandatory standards are mentioned below.
- Total Supply: Total supply is the total number of crypto tokens to be created.
- Approve: This rule requires the approval of Smart contract functions to eliminate counterfeit crypto tokens.
- BalanceOf: This feature shows the total crypto tokens held by an address and allows users to check the balance of their holdings.
- TransferFrom: This feature enables the automation of crypto transactions.
- Transfer: This rule allows for the transaction of crypto tokens from one address to another.
- Allowance: A Smart contract sees the balance of the Ethereum wallet it is trying to transact with. The allowance feature enables the contract to complete any transaction if the user has a sufficient balance.
These six rules must be programmed into a crypto token to be considered an ERC-20 token. The tokens without these standards will not be able to interact with Smart contracts effectively.
The crypto token’s name, its symbol, and the decimal points are optional rules that are not required to be included. These optional rules can enhance the usability of a crypto token.
Which cryptos are ERC-20 standard?
Over 500,000 crypto tokens are compatible with ERC-20 since introducing the standard. Some popular ERC-20 crypto tokens include Decentraland (MANA), Uniswap (UNI), ApeCoin, Basic Attention Token(BAT), and Aave.
Conclusion
ERC-20 is a set of rules or standards used to create crypto tokens on the Ethereum blockchain. Shiba Inu (SHIB) and Basic Attention Token (BAT) are some of the popular ERC-20 crypto tokens in the market. ERC-20 provides a set of standards that are widely used in the Ethereum blockchain. These standards help the Ethereum network to operate efficiently.
You can buy ETH[3] and several other ERC-20 tokens on ZebPay today.