Crypto: What is ERC-20?





Crypto - What is ERC-20

ERC-20 could seem a lot of confusing to crypto beginners, intermediaries and even the acclaimed pros, and in this post, I’ll be walking you through all you need to know about the term ERC-20 especially in the massive up spring ICO boom blockchain startups.


Whenever you see or heard about ERC20, just know that it’s talking about Token (crypto-coins) relating to Ethereum Blockchain ecosystem specifically. ERC20 is otherwise known as ERC20 tokens, which exist as digital assets or represent financial value; and also remains as a crucial aspect of Ethereum now into the future.



Ethereum as a decentralized platform that creates additional functionality such as the ability to execute “smart contracts” on the blockchain system, leading to endless potential applications, new rules of ownership, alternative transaction format or different ways to transfer state that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference is another Bitcoin contemporaries and competitor just like other mimicking altcoins other there.

ERC-20 in general sense maybe referred to different kind of tokens (ERC-20 Tokens standard), and it defines some set of standard rules required to interact with each other on the Ethereum network, which must be met in order for a particular token to be accepted and be called as ECR20 Tokens.

The goal of Ethereum turning completely programming language is to allow developers to write more programs in which blockchain transaction could govern and automate specific outcome. Although, the structure of Ethereum blockchain is very similar to Bitcoin in a sense that it shared record of the entire transaction history, the differences is that Ethereum nodes store the most recent state of each smart transaction, in addition to all the ether transactions.



While “ERC” stand for Ethereum Request for Comment, “20” on the other hand stand for Unique Proposal ID Number. This is an official protocol for proposing improvements to the Ethereum network, or a handle of clarification on how tokens developers should deploy smart contract.

ERC-20 tokens are Ethereum blockchain digital assets that have a variety of values attached, and can be bought, sold, or traded just like Bitcoin, Dogecoin, Litecoin or Ethereum or any other cryptocurrency out there.

ERC-20 Tokens therefore, are significant token standard that can make use of Ethereum Blockchain essentially for smart contract, which was developed or existed since 2015, but only recently formalized by Ethereum developers due to increasing interest in upcoming ICO’s.

ERC-20 defines a common list of rules for Ethereum tokens to follow, meaning that this particular Ethereum tokens empowers developers of all types to accurately predict how new tokens will function within the larger Ethereum network.



The impact of ERC-20 token standard on developers is massive in a sense that project do not need to be redone each time a new token is released because, they are designed to be compatible with new tokens, provided these new tokens comply to the set rules.

This means that, for new token to be released through Ethereum public blockchain either through initial coin offerings, developers of these new tokens must have by and large observed the ERC-20 rules that make the new token ERC-20 compliance.

ERC-20 set out list of some common rules for all Ethereum tokens to follow, and this is a set of rules for tokens developers of all types on how new developed tokens will function with the larger Ethereum public blockchain system, which is what is generally known as Ethereum Smart Contract.



Ethereum aims to abstract away bitcoin’s design so that developers can create applications or agreements that have additional steps, new rules of ownership, alternative transaction format or different ways to transfer state. To some people, Ethereum is how the Internet was supposed to work.

The ERC-20 Token standard is a set of criteria developed by Ethereum community for how to set up smart contract on the blockchain in order to ensure optimal interoperability. At high level, ERC20 token standard contain four main parts, which specifies;

1. Transfer of tokens by the owners – obvious requirement that tokens must be transferable, and what ERC-20 defines is that you would tell the token contract to transfer some number of tokens to someone else. You would not tell a token contract to ‘send’ or ‘give’ tokens to someone else: the term ERC20 choose is TRANSFER.

2. Transfer of tokens on behalf of the owner – allow you to approve someone to take some number of your token and transfer from you to someone else. For example, one goal of Ethereum and smart contract is “veridical computing” and a way for this to happen is for someone to publish their contract which says; “if you approve me to use some of your tokens, I will give you X”. X could be another token or “smart property”. Now you can read that contract and execute the contract. As part of the contract execution, it will transfer from your tokens and deliver you X. If the contract did not have those terms, you had full control to not approve and execute it in the first place.

3. Getting data about the token – The other part of ERC-20 allows anyone to get data like the name, symbol, total supply of tokens, as well as the balance of an account.

4. Token events – ERC20 specifies the format and meaning of certain events, for example, a transfer must indicate firstly the sender, secondly the recipient, and thirdly the number of tokens. Users’ interfaces can then take comfort that what they display to users will make sense for tokens that comply with ERC20.

ERC20 before it became standard was simply an approach by developers who wanted to create their own transferable tokens. However, but tokens that differed from standard created some problems on the Ethereum network simply because they allowed user mistakes that led to sending tokens to a wrong address, thus, irreversible.



Since older tokens differed from standard token created some problems on Ethereum network due to the fact that they might have been written in a way that’s incompatible with other projects, ERC20 standard tokens follows standard, easing the movement of tokens between different distributed app (Dapp) projects.

ERC20 standard specifies six set of function and signals for the benefits of other tokens within Ethereum network system which the above tasks can be achieved, and ensured that Ethereum tokens of different types will typically work the same in any place within the Ethereum network system; meaning that almost all wallets which support the ether currency also support ERC-20 complaint tokens.

There are list of ERC-20 compliant wallets that you or Token project provided can be used to store your tokens and participate in token sales. This is usually a wallet website or wallet app where you and only you hold the private keys. This private key or wallet address is always needed to correctly interact with smart contract functions, like transferring tokens.





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