ERC-20 is the technical standard for creating tokens on the Ethereum blockchain. It provides interoperability, standardization, and easy integration with dApps and exchanges. Join Crypto Daily as we discuss what it means to comply with Ethereum’s ERC-20 standard.
Understanding ERC-20 Compliance
ERC-20 is the technical standard for creating and implementing smart contracts on the Ethereum blockchain. The standard defines a set of rules and guidelines that tokens on the Ethereum blockchain must adhere to be ERC-20 compliant. ERC-20 tokens can represent any tradable asset, such as cryptocurrencies, loyalty points, or real-world assets (RWAs). ERC-20 tokens have become the de facto standard for creating and launching new tokens on Ethereum and allow for interoperability and ease of integration with various decentralized applications (dApps) and exchanges.
What Does ERC-20 Mean?
ERC-20 stands for Ethereum Request for Comment 20 and is a technical standard that defines a set of rules and guidelines that must be followed to create and implement smart contracts on the Ethereum blockchain. The standard was introduced by Fabian Vogelsteller in 2015 and has become the most widely adopted standard for creating tokens on the Ethereum network.
Key Features of ERC-20
Several features of ERC-20 tokens make them unique, including:
Interoperability
One of the primary issues concerning blockchains is interoperability. ERC-20 tokens are designed to address this and be interoperable, meaning they can seamlessly interact with other tokens and smart contracts on the Ethereum blockchain. Interoperability facilitates easy integration with various decentralized applications (dApps) and exchanges, making ERC-20 tokens highly versatile and widely accepted.
Token Standardization
ERC-20 provides a standardized set of rules and functions that all tokens on the Ethereum network must follow. Standardization ensures that ERC-20 tokens have a consistent interface, making integrating and interacting with different applications and wallets easier. This also enables developers to build tools and services that can work with any ERC-20 token without altering or customising their code for each token.
Token Transfer Functions
ERC-20 defines a set of functions allowing tokens to be transferred between addresses. These functions include (1) transfer, (2) transferFrom, and (3) approve. The transfer function is used when sending tokens from one address to another, while transferFrom allows third-party addresses to transfer tokens on behalf of the token holder. The approve function grants permission to a third-party address to transfer tokens.
Token Balance Tracking
ERC-20 tokens also include functions to track the balance of tokens held by a specific address. The (1) balanceOf function allows anyone to check the token balance of a particular address, while the (2) totalSupply function returns the total supply of tokens in circulation.
Event Logging
ERC-20 tokens can emit events during certain actions, like token transfers and approvals. These events enable smart contracts and applications to listen for and react to specific token-related activities. Event logging enhances transparency and enables developers to build applications that respond to specific token events.
The Advantages of ERC-20 Tokens
Tokens built according to the ERC-20 standard offer several advantages, including:
- Easy Token Creation: The ERC-20 standard simplifies the process of creating and launching new tokens on the Ethereum blockchain. Developers following the ERC-20 guidelines ensure their tokens are compatible with existing wallets, exchanges, and dApps to ultimately reduce the barriers to entry for token creation.
- Widespread Adoption and Liquidity: Its widespread adoption allowed ERC-20 to become the standard for token creation on the Ethereum network. This standardization led to many ERC-20 tokens being listed on exchanges, providing liquidity and easy access to a wide range of tokens for users, ultimately leading to an increase in crypto adoption.
- Interoperability with dApps: ERC-20 tokens seamlessly interact with various decentralized applications (dApps) built on the Ethereum network. The interoperability accompanying ERC-20 allows for the integration of tokens into a wide range of applications, such as decentralized exchanges (DEXs), lending platforms, and decentralized finance (DeFi) protocols.
- Community Support and Development Tools: ERC-20 tokens benefit from a large and active community of developers, which provides support, resources, and development tools, an advantage not offered by many networks. The community-driven ecosystem fosters innovation and enables developers to build on top of existing ERC-20 infrastructure, accelerating the development of new applications and services.
Final Thoughts
ERC-20 is a widely adopted technical standard for creating and implementing tokens on the Ethereum blockchain. The key features of the ERC-20 standard, which include interoperability, token standardization, and easy integration with dApps and exchanges, have made these tokens the go-to choice for token creation and deployment. The numerous advantages of ERC-20, such as easy token creation, widespread adoption, and community support, have contributed to the growth and success of the Ethereum ecosystem.