Should the ERC20 standard be Improved?
The ERC20 token is widely used and accepted as the best standard when it comes to smart contract-based tokens. Having the same standard set for all tokens is convenient and also ensures compatibility between the tokens on the larger Ethereum network. This poses an important question of whether it should be improved?
What is the ERC20 standard exactly?
These tokens can be issued for various purposes, from being a share to an official or in-game currency. This standard defines a set of rules which is governed by smart contracts that need to be followed by every token on the network. A side benefit of this is that developers can assess the functionality of tokens that are released in the future. The ERC20 token standard can be issued easily to any token, taking away the time-consuming process of recreating it for other tokens.
This is different from NFTs as they are non-fungible as every token is not interchangeable, however, with ERC20, every token has the same value (fungible) within the entire Ethereum ecosystem. Some great examples of popular ERC20 tokens are Chainlink, Binance, and Tether. To add to its variety of features, it is compatible with wallets and exchanges without having to do additional things, it can transfer tokens from one account to another. To get the current token balance of an account and also the total supply of the token available on the network.
What are the problems faced by ERC20?
A key feature of the ERC20 standard is that it approves that a specific amount of token from an account can be spent by a third-party account. A famous hacking incident ended up with people losing a total of $31,000,000 million dollars on July 20, 2017. More losses were prevented thanks to a bunch of white hat hackers, who were forced to take the money so that the hackers couldn’t. After which, they returned the Ethereum they took to their respective owners. This all stemmed from the default smart contract code that is given by Parity (Parity provides blockchains with open source technologies to help them scale) clients to initialize multi-signature wallets. In simple words, they exploited the code to restore the wallets and make themselves the owner of all these digital wallets, something like when you use forget password on a social media platform. If you are worried, this issue was resolved soon after the incident. However, this does leave people paranoid about another possible hack in the future that might exploit such small errors. The issue brought to light the unstable foundation that lets hackers bypass the security of digital wallets. In addition to users sending transactions to smart contracts and not being recognized by other smart contracts resulting in ethers being lost. This also looks quite unpleasant and something people might want to stay away from.
Is there a solution on the horizon?
Yes, there is a possible solution that looks quite promising and it’s called ERC777. This problem can be solved via an inefficient process that is very counterintuitive. The ERC777 can come in really handy as it uses Operators who can transfer amounts in the name of the user. This not only gives complete control to its users but also permits them to add properties later. In addition to rejecting contracts and addresses which prevent the loss of tokens. This does not take away from the traditional functions(ERC20 standard), which can still be used. The only downside of this is the sharp increase in gas fees which is not a big problem when you compare it to the benefits.
Published By,
DWAYNE D’CUNHA, WRITER ON MEDIUM.
Originally published at https://www.linkedin.com.
