What Is ERC-20 Ethereum Standards & How It Is Used?

What Is ERC-20 Ethereum Standards & How It Is Used?

By CryptoWise | CryptoWise | 18 Jun 2021


ERC-20 standard allows developers to build token applications that are interoperable with other products and services. Today we will understand all the nuances associated with ERC-20 

1*nslW_BCVUniaE62mZTHcNw.jpeg

“Ethereum blockchain sets the right foundation & comes loaded with all the tools one needs to build, their dream decentralized projects, it has been a leader in its space and now looking to encash its already evolved ecosystem and userbase with the much-awaited ETH 2.0 version”

Today we will explore one of its coolest features or say a well-established ETH standard that helps multiple projects living on its platform to build their native tokens.

Yes, we will dig deeper into the ERC-20 Ethereum standard. We will cover this journey covering

  • What Is ERC-20 standard & Its Role in The Blockchain Network?
  • How to transact with ERC-20 tokens?
  • Prominent Crypto Projects using the ERC-20 standard

 

What is ERC-20 Standard?

 

Before we jump into defining the ERC-20 standard, we should understand what the token means in the context of the Ethereum blockchain world

What Is Token In Ethereum Network?

Tokens can signify virtually anything in Ethereum:

  • It can be a digital representation of any Fiat currency like USD
  • It can act as a lottery ticket
  • It can represent company equity shares
  • It can even represent digital gold & much more…

Now since it is such a great utility this token needs to have some rules and standards which can be extended and inherited, to be used by some other projects who may like to use the Ethereum blockchain platform. One such standard which is quite widely accepted by the Ethereum community is the ERC-20 standard.

The ERC-20 which is expanded as Ethereum Request for Comments 20 was created by Fabian Vogelsteller in November 2015, which became a token Standard that implements an API for tokens within Smart Contracts.

The ERC-20 standard is an Ethereum token standard, which acts as a guideline, for creating fungible tokens. It is a scripting standard used within the Ethereum blockchain, that defines certain protocols and actions to be taken care of, by any of those fungible tokens.

 

Characteristics of ERC -20 Tokens:

Every token which acts as a utility token to perform certain functions in the Ethereum network carries the following key attributes

  • They Are Fungible, which means every token should have the same code base, but they can be differentiated by their transaction history

As per Investopedia :

Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. Fungible assets simplify the exchange and trade processes, as fungibility implies equal value between the assets.
  • They are Transferable: Every token with ERC-20 standards can be easily sent or received on ERC-20 compatible addresses
  • They have a limited supply: Every token with ERC-20 standards are required to have a fixed supply threshold

 

What Are Some Of The Prominent Use Cases Of ERC-20 Token Standard?

 

As a Transaction Fee: (Gas Fee):

There are multiple Defi and Dapps which are hosted on Ethereum Blockchain, to handle any transactions where one needs to give the fee(called Gas), these projects rely on their ERC-20 tokens which are held by the user in their wallet.

Act As a Digital Asset:

ERC-20 token can be used to represent multiple real-world properties like real estate, it can also represent art, music, stocks, physical hard drive, etc. In fact, it can represent physical gold in the digital form.

To Raise Funds(Crowdfunding ):

As an entrepreneur, if you are looking to crowdsource funds for your crypto or startups or any business for that matter, you can do so in the form of ERC-20 tokens. The investors get rewarded in the form of the newly minted tokens as initial coin offerings prior to the official launch

In Defi & Dapps :

ERC-20 based tokens are used on multiple Defi, Dapps, and business protocols

So the crux is that ERC-20 tokens act as one of the backbones of the Ethereum ecosystem, facilitating the development of multiple decentralized applications and popularizing the acceptance of the blockchain economy.

ERC-20 has been the key reason behind the widespread popularity & adaptation of decentralized technology by establishing a shared standard for participation in the blockchain world

 

Top ERC-20 Tokens One Should Know:

 

ERC-20 tokens have seen very large-scale adoptions due to Ethereum blockchain popularity and the ease which this token standard provides to the project developers. There are more than 900 projects which are ERC-20 token standards-based.

Some of the top ERC-20 based crypto projects listed on the popular exchanges like Coinbase, Binance, Kucoin, Kraken etc, are :

  • EOS (EOS)
  • MATIC(Polygon)
  • Enjin Coin
  • TRON (TRX)
  • VeChain (VET)
  • ICON (ICX)
  • Binance Coin (BNB)
  • OmiseGO (OMG)
  • Zilliqa (ZIL)
  • 0x (ZRX)
  • Maker (MKR)
  • Augur (REP)
  • Golem (GNT)
  • Status (SNT)
  • Aion (AION)
  • Loopring (LRC)
  • Waltonchain (WTC)
  • Basic Attention Token (BAT)
  • Mixin (XIN)

and many more….

Did You Know?

 

EOS, Tron, and VeChain were all originally issued as ERC20 tokens and have now converted to their respective mainnets.

How To Recieve ERC-20 Token?

 

If you own some ERC-20 based tokens in your wallet, you will be able to transfer to any other wallet or user which has the Ethereum addresses compatible with ERC-20 standards. Similarly, when you open any of your tokens held in your wallet, you can see the public address mapped against the same. You must be able to see if this address if of ERC-20 type or not. If your token is ERC-20 token compatible you can use this address to send or receive any ERC-20 compatible token

For Example:

If You want to receive an Enjin token from your friend in exchange for any services you have provided, in that case, you need to provide him your Enjin’s ERC-20 Ethereum address which you can find in your wallet by clicking on the Enjin coin and viewing the ERC-20 address listed against the same. Remember! Your friend will be required to pay the Gas fee for the same which will be deducted from his wallet.

Note!

Not every wallet will have the ERC-20 tokens you, maybe looking to transact to you need to do your homework right if you want to deal with ERC-20 tokens.

As far as ERC-20 tokens are concerned :

  • Mew: MyEthereumWallet
  • MetaMask

Are reliable wallets to look out for as it support all kinds of ERC-20 tokens.

What’s Next?

How to safeguard and transact your cryptos using MetaMask or any other Wallet, is one of the necessary topics that need a detailed explanation, so we will be covering the same in the next piece pertaining to ERC-20 tokens. We will cover the following topics

  • How to set up MetaMask & Use it to transact?
  • Understanding Hot & Cold Wallets?
  • Some top Private wallets which one should look for protecting their valuable crypto assets.

 

Summary:

Ethereum 1.0 has already got thousands of projects spanning from Defi, Dapps, NFT’s, Derivatives, etc. Due to increasing network congestion & rising Gas fee, Ethereum’s Dapp ecosystem is failing to scale currently. 
But with the proposed ETH 2.0 new avatar, which will be migrating to the Proof-Of-Stake consensus mechanism, Gas fee issues will be largely solved, this will be a win-win situation for existing projects and will attract more Decentralized projects to grow and thrive on top of Ethereum 2.0 scalable and secure ecosystem.

Also with its all-new avatar, we will see massive adoption of ERC-20 token standards along with other ERC standards listed below

  • ERC-721: For NFT(Non-Fungible Token )

Non-Fungible Token(NFT) For Absolute Beginners
What Is NFT? How Does It Work ?medium.com

  • ERC-1400: These are used for security tokens so that the tokens can be sold as securities.
  • ERC-223: This standard allows for the transaction fees to be paid using the tokens involved, and not requiring Ether necessarily.
  • ERC-777 — It is an improvement on the existing ERC20 standard by lowering overheads and adding new features.
Ethereum is the second largest crypto project (In terms of market cap) that has all the ingredients to remain the most preferred blockchain platform for all the aspring entrepreneurs looking to build Decentralized apps and financial solutions on top of it. The future of banking will find its true mate in the form of ETH 2.0 and it's my wish and hope that all my fund transaction in the future happens over the blockchain network involving crypto instead of Fiat currency. I know this wish will see many ups and downs before it gets truly realized, but i am optimistic that it will happen in my lifetime for sure.

NOTE!

This article was originally  published on my Medium account, here is the link:

https://medium.com/crypto-wisdom/erc-20-token-basics-for-crypto-beginners-231f988db36

How do you rate this article?


125

0

CryptoWise
CryptoWise

On a mission to educate one and all about crypto and blockchain technology


CryptoWise
CryptoWise

Get educated about blockchain and crypto projects and concepts with the simple to understand content

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.