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What are ERC-20 tokens?

For Beginners.

You are new to the cryptocurrency world, and you keep hearing and reading everywhere about these ERC-20 tokens, but what the heck are they?

ERC stands for Ethereum Request for Comment and 20 is the number attributed to this request.

In simple words, ERC-20 tokens are the cryptocurrencies (tokens) created exclusively on the Ethereum blockchain platform mostly for monetary purposes. They carry a set of rules or protocol that possesses the ability to become VIRTUAL CURRENCIES (rules cited further along). Anyone can use these “frames” per se, to create their own ERC20 token project. It was built with the intentions of giving anyone the autonomy to create their own token without necessarily having to develop their own blockchain.

“Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference. These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.” — Via Ethereum’s website

The difference between an ERC20 token and Bitcoin, for example, is that ERC20s do not own their own blockchain; instead, they are co-dependent of Ethereum´s blockchain, while Bitcoin is a coin all on its own without the need to rely on another platform. ERC20 token owners may not want to bother building their own blockchain, so instead, they use Ethereum´s, which means their tokens will forever live on top of it.

But no worries! No one owns Ethereum; therefore, even though your project may be co-dependent of it, it will not be controlled by anyone other than yourself. You fully own your ERC20 token project.

And before you ask, Bitcoin does not offer this type of contract base for token creation; no one can create their own token on top of Bitcoin´s platform as of yet. Just to make that clear. ;)

So if you want to build your own token Ethereum´s got you ;)

Here are some well-known ERC-20 tokens:

· BNB: a native token of the Binance exchange the biggest in the market by volume.

· OMG: also known as Omisego, an open payment platform.

· VET: veChain is the world´s leading provider of enterprise blockchain solutions.

· WCO: a cryptocurrency focused on businesses and real estate.

(*All of these can be found on CoinMarketCap and Ethplorer for verification)

As you can see they all have different uses, yet, are all ERC20 based, and thus must comply with its protocol. It is probably safe to say that most tokens (cryptos) created on the Ethereum platform are ERC-20 based, however, there are other protocols such as ERC223 and ERC777 which are similar to the ERC-20, but not as popular today. There is also the ERC721 known for the Cryptokitty tokens, this is by far the most popular dAPP on the Ethereum Platform.

On November 19th, 2015 the ERC-20 token standard was proposed by Fabian Vogelsteller, and it quickly became popular with startups and crowdfunding companies due to the simplicity of distribution. And in no time ICOs and Airdrops became a lucrative business because of the ERC20´s proposal.

According to Blockgeeks there are 6 mandatory rules as follows:

1. totalSupply: indicates the total supply of a token;

2. balanceoF: number of tokens that a particular address has;

3. transfer: allows one to send a given amount of tkns to another address;

4. transferFrom: allows one to set up automated payments;

5. approve: approves ERC20 tokens withdrawals

6. allowance: whenever the user doesn’t have enough in their account to complete the transaction, the function will cancel out the transaction.

And 3 optional rules:

1. Token Name

2. Symbol

3. Decimal (up to 18): divisibility to help determine the lowest possible value of a cryptocurrency (or token). Max. decimals allowed is 18.

As you can see by its features, it has all the commands/rules needed for the creation of digital units of monetary value, making it a popular technical standard used for smart contracts.

Summing-up, ERC-20 tokens are “coins” that carry a set of rules on the Ethereum blockchain platform, and such rules can be used by anyone to create their own token project.

Final Thought: When first getting started it is quite overwhelming trying to keep up with all the vocabulary, and codes, addresses, terms…etc.

So we have prepared a Cryptocurrency Vocabulary thinking of just that, to help you to navigate through the crypto world smoothly.

You might also want to check out the 12 Best Resources for Cryptocurrency Beginners and Token vs Coins

Our Blog contains tons of material for beginners to help you to get started. You can check out our blog for all other cryptocurrency related topics on our BLOG at


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