ERC- 20 TOKENS – What It Means for Developers and Crypto Users.
You see, The ERC -20 token is the poster child for all tokens hosted on the Ethereum Blockchain. Such celebrity Status!
Have you ever tried to transfer cryptocurrency from one wallet/exchange to another? If you have, you should have come across the Erc-20, Tron and BEP networks. You would have probably realised that it’s impractical to transfer amongst incompatible wallets and tokens. This article will let you know why that stunt you tried to pull didn't work out and a whole lot you didn't know about the ERC-20 tokens.
To begin with….What are tokens?
Tokens are digital assets. While all crypto coins can be termed tokens, not all tokens are coins.
What do I mean?…
Coins are usually typical to a blockchain and they can be used to trade and store value.
Tokens live on other coins’ blockchains. Examples of tokens that live on the Ethereum blockchain are BAT, BNT (bancor), Ox e.t.c
While coins operate like regular fiat that serves as a medium of exchange, tokens operate like stocks that serve as an asset that could represent (shares, currency, loyalty points, certificates, vouchers or even real-world objects). In fact, anyone or organization can create their own tokens without much hassle.
Examples of Tokens are Uniswap, Polygon, ERC-20 tokens, Chainlink and so on.
Now…What is the ERC-20 token?
Now to what we are actually interested in. Trust me, the meaning it’s not as technical as its name.
Erc-20 tokens are a digital asset that operates on the Ethereum blockchain and can be sent and received.
In addition to the above, Erc-20 tokens serve as the scripting standard for all tokens hosted on the Ethereum blockchain.
They are obtainable on the Ethereum blockchain and all Ethereum tokens are simply smart contracts that operate on the Ethereum blockchain.
Remember your lessons from Blockchain 101 that explains the primary things Ethereum Blockchain does. (storing records and creating smart contracts)
Good, you remember.
The latter function of this blockchain is what allows you to create tokens using a set of codes and that is why all tokens are basically smart contracts.
ERC-20 and its poster child (token) status.
Erc -20 token is one of the most significant tokens on the Ethereum blockchain. It attained this status because it‘s a standard for implementing tokens in any token–based smart contract whatsoever that wants to rent the Ethereum blockchain.
This implies that, for any token-based smart contract to be executed on the Ethereum blockchain, it must meet the requirement of the ERC- 20 TOKEN standard.
What does this mean for a developer?
• If you choose to build a token-based smart contract on the Ethereum blockchain, it should comply with the guidelines of the Ethereum blockchain so as to enable hassle-free interaction with other tokens on the Ethereum blockchain.
• Developers are also saved the hassle of updating and new tokens upon launch once they follow the rules of the ERC-20 standard.
• The need for a standard guideline for implementing token-based smart contracts became imperative because developers were using different identifiers for the same type of function and required much maintenance. The Erc-20 ensures that all tokens on the Ethereum blockchain become kindreds and remain so by the reason of using the same implementation code.
What is Contained in the ERC-20 token smart Contract?
Remember that ERC-20 tokens are smart contracts right. Below is the content or rather, the line of codes in the ERC-20 token.
The Ethereum community came up with the following golden standard rules for creating tokens on the Ethereum blockchain.
Optional
- Token Name
- Symbol
- Decimal (up to 18)
Mandatory
- totalSupply
[totalSupply]: This identifies the total number of tokens created
- balanceOf
[balanceOf]: This function returns the total number of tokens available in an account.
- transfer
[transfer]: This function allows you to transfer from your total supply of tokens created to an individual account.
- transferFrom
[transferFrom]: Ultimately, you would want to move your funds around. This is thee function that enables you to transfer your tokens from people.
- approve
[approve]: If this function isn’t added, fraudsters would conveniently make counterfeit tokens and tag them ERC 20-tokens. Therefore, this function checks a transaction against the total supply of tokens created. No token can be duplicated this way.
- allowance
[allowance]
Perhaps you forget you are low on funds, this function will call you out as a liar if you try to transfer hypothetical tokens that do not exist. It checks your balance before initiating a transaction.
What does the ERC 20 tokens mean to you as a user?
• As a cryptocurrency user, you should know that the Erc-20 token is the gold standard for all tokens hosted on the Ethereum blockchain. Therefore, before participating in an initial coin offering of any token hosted on the Ethereum chain, ensure it’s ERC -20 compliant(can be found in the white paper) else, your token might not be compatible with other platforms.
• Ensure wallet compatibility when moving funds. For context, the coin base wallet isn't compatible with BEP-20 tokens.
• Also, when a token is migrated(moved) from the Ethereum blockchain to its own native blockchain, holders of such tokens would need to swap their tokens for the new coin on the new blockchain as such tokens would definitely become non-compliant with the ERC-20 standard and you would also not be able to send this tokens to an Ethereum based wallet. If you are super curious and you decide to see for yourself what would happen, you may end up losing your coins.
The Erc-20 token which is considered the poster child for token implementation doesn’t however, comes without its own flaws. Many have critic the account and from [transferfrom] function. Some tokens have also been lost to misuse. Until there is an updated guideline that fixes this, we are stuck with the ERC-20 tokens serving to be the benchmark for token implementation.
Also, the ERC-20 token is an acronym that means Ethereum Request Community if you care to know and the “20” just probably denotes the year it became a thing which was 2015.
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