ERC-20 Tokens
What are ERC-20 tokens and why do you care?
If you’re into crypto, chances are good that you’ve seen the term ERC-20 a few times. When i first started in this industry, I had no idea what it meant, and it’s ok if you don’t either.
So, what is ERC-20 in a nutshell?
An ERC-20 token is a token that was designed for use on the Ethereum blockchain only. ERC-20 stands for Ethereum Request for Comment, with 20 being the number assigned to that request. Basically, they are a bunch of smart contract standards that decentralized application (DApp) developers use to create a cryptocurrency for their particular platform.
Standards?
These standards describe the function of a given token, and help explain the contracts it will be used in conjunction with.The standards are important so that a token can be viewed and shared in a crypto wallet. There are six mandatory standards, and three that are optional.
Optional
- Token Name
- Symbol
- Decimal (up to 18)
Mandatory
- TotalSupply
- BalanceOf
- Transfer
- TransferFrom
- Approve
- Allowance
The functions of a token and the specifics of how it interacts with the blockchain should all be found in the company’s white paper.
So, why are they good?
ERC-20 simplifies a lot for developers. ERC-20 has standardized how tokens are made and talked about on the Ethereum blockchain. In fact, Ethereum is the platform of choice for the majority of new token sales due to both its ease of use and simplicity.
OK, OK, I get it. Just give me an example.
ERC-20 tokens do not automatically show up in a crypto wallet when added or sent to an address. They must be manually added. Let’s look at a real-life example. We’re going to use RFR as the example as it is the only ERC-20 token that is currently in my wallet.
As you can see, I have 470 RFR. This token is different from ETH but still runs on the ETH network. The only reason this token shows up in my wallet is because I added a custom token by entering the token address, symbol, and decimals:
Sometimes, for well established and widely used tokens, the wallet will have the information ready for you to add:
ERC-20 is basically just a set of rules that makes token creation simpler for developers. The main thing that you need to worry about is being sure that your wallet supports the ERC-20 token BEFORE having it sent to your address.
A token can be used for pretty much anything — a currency, an asset, a service… — so the future of tokenization is very exciting. ERC-20 is just one way that Ethereum is supporting this future by creating easy to follow and understand rules for developers and consumers alike. As the father of the ERC-20 token said, “I believe we are just at the beginning of tokenizing everything,” so watch this space!
