ERC-20 as a core standard behind Ethereum’s success

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  • ERC-20 tokens are Ethereum-based and found within its network. They are essentially a standard of fungible digital tokens that live and are usable within the Ethereum networks
  • Currently, the fungible digital token creation concept is most popular with ICOs and crowdfunding companies who have based their creation rules on the ERC-20
  • Smart contracts implement APIs to create the fungible digital token

Understanding the crypto world for a beginner might be daunting, especially when you lack the technical expertise required when being introduced to blockchain technology. Digital currencies have attracted many investors and built multiple applications using blockchain technology.

It’s luring, but have you ever thought about what some of these terminologies mean? Smart contracts, on-chain protocols, non-fungible and fungible digital tokens, and consensus mechanisms are vital in the crypto world and NFT ecosystem.

Understanding the fundamental basics of a network, be it the Ethereum network or Bitcoins PoW mechanism, are critical points that often differentiate between a beginner and a veteran crypto trader. You probably have heard the term ERC-20 token but never really understood it; here’s an elaboration.

Understanding ERC-20 token

ERC-20 token is an Ethereum-based token found within its network. It is essentially a standard of fungible digital tokens that live and are usable within the Ethereum networks. Fungible digital tokens mean that each token within the set is indistinguishable from every other token in the set. Just like how one dollar is fundamentally different from 100 dollar bill, they both are the same currency but are still different in other terms.

In layman’s language, fungible digital tokens are interchangeable, unlike its counterpart, non-fungible tokens(NFT).

The concept behind ERC-20 was first developed in the Ethereum community back in 2015 but was officially launched in September 2017. 

erc20 creatd fungble tokens and began the first success wave of the ethereum network.
ERC-20 tokens have led to the development of numerous prominent tokens such as Tether(USDT).[Photo/Youtube]
In other terminologies, ERC-20 is a blueprint for creating fungible tokens compatible with the Ethereum network. It is critical to remember that Ethereum is a platform that hosts multiple applications, NFTs and blockchain technologies and is a constantly expanding network. Fabin Vlgelstellar came up with the idea to standardize tokens with smart contracts on the Ethereum network. 

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Many new developers have used this standard to develop new tokens within the cryptocurrency world and even gained traction within the NFT world. Currently, the fungible digital token creation concept is most popular with ICOs and crowdfunding companies who have based their creation rules on the ERC20.

Each fungible digital token based on ERC20 has its unique utility, such as granting users voting privileges that might impact the future of the token or offering rewards when a user performs various tasks. 

How ERC-20 Tokens work

Smart contracts implement APIs to create the fungible digital token. They also aid ERC 20 in facilitating the transaction, validation and record keeping of the tokens within the Ethereum network. 

The blockchain technology behind the ERC-20 must meet a series of factors.

  • Total Supply – The total number of ERC 20 tokens that are issued is defined, and the circulation of the tokens
  • balance of – the account balance of the token owner’s account
  • Transfer – A mechanism automates transferring a specific number of ERC-20 tokens to a specified address.
  • Approve – allows the user to withdraw a certain amount of money from their account up to a specific amount.
  • TrabsferFrom – automates the execution of transfers of a specified number of tokens from the specified address.
  • Allowance – returns a set number of tokens from a spender to the owner.
  • Transfer – a confirmation notification that is triggered after a transaction is successful.
  • Approval – a log of an approved event.

Remember that these are the fundamental concepts and primary attributes each ERC 20 token must have. More specifically, they allow blockchain technology within the Ethereum network to perform certain functions. As a result, the keeping track of token circulation, storing and returning balances, establishing transactions, granting approval and automating transactions. All these are mechanisms that ensure accountability of the fungible digital token.

ERC-20 acts as the universal language all tokens on the Ethereum Network use. It makes the creation, trading and spending of fungible tokens much more straightforward.

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ERC-20 tokens can also represent loyalty rewards and reputation points, especially when numerous companies offer crypto payments for their services. 

ERC-Tokens available today

Currently, the most traded and used tokens within the Ethereum network and blockchain technology are below. They include;

  • Tether (USDT)
  • Chainlink (LINK)
  • Binance coin (BNB)
  • USD coin (USDC)
  • Wrapped Bitcoin (WBTC)
  • Dai (DAI)

ERC 20, or Ethereum Request for Comment, number 20, is responsible for the vast growth experienced within the Ethereum network. Its ability to increase interoperability within tokens has allowed the creation of multiple fungible digital tokens.

Read: Wrapped Bitcoin a new way of applying Bitcoin in Ethereum ecosystem


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Ken Mutuku
Ken Mutuku
I am an enthusiastic writer who believes that facts, knowledge and opinions can be expressed vividly with just a few words. I think that all forms of writing achieve this; hence I have a wide area of expertise and interest, such as cryptocurrency, psychology and the human mind.