What are ERC-20 tokens on the Ethereum network?

What are ERC-20 tokens on the Ethereum network?

Ethereum ERC-20 tokens are the key for anyone to create smart contract-compatible cryptocurrencies that meet the guidelines set by Ethereum.

If you have investigated Ethereum, Ethereum blockchain, or any other cryptocurrency that uses the ecosystem, you have probably seen or heard the term ERC20 development. This mysterious acronym plays a very important role in Ethereum and cryptocurrencies in general. This mysterious acronym plays a very important role in Ethereum and cryptocurrencies in general.

From there, they can harness the power of the entire ecosystem and the Ethereum blockchain. But what are they really and why are they so important?

What is an ERC-20 token?

Ethereum Request for Comment number 20, better known as ERC-20 is the Ethereum standard for smart contract-enabled tokens. Unique in Ethereum’s blockchain, these expendable tokens are interchangeable with other tokens.

IMPORTANT: Expendable tokens should not be confused with non-expendable tokens (NFT).

An ERC-20 token can refer to an asset, property, right, access, cryptocurrency or any other element that is not unique and can be exchanged for another. ERC-20 tokens allow digital assets to be easily interchanged with each other.

ERC-20 tokens explanation: why were they created?

When smart contracts started to stand out, there were many obstacles to overcome. Especially since anyone could create them. At the time, there was no generalized standard encoding, which meant there was no way to guarantee that different tokens could be used, exchanged, or created.

Before standardization, each application had to create its token, and users working on different platforms had to face a difficult and long process to transfer them from one side to the other.

The introduction of ERC-20 allowed people and projects to be interconnected. With many well-established digital coins adopting the ERC-20 standard.

Advantages of Ethereum ERC-20 tokens

Developers, project creators, companies, communities and individuals see great benefits in the use of Ethereum ERC-20 tokens. We have selected some that highlight how each type of user can benefit.

  • Interconnected projects

A standardized approach to tokens makes it easy to transfer and exchange them. This allows different projects and communities to collaborate with each other while offering users the possibility of easily changing their files for others.

  • Easy coin creation

Thanks to standardization, developing your own token couldn’t be faster. By following a few simple steps, a developer can have a new coin running smoothly and on short notice.

  1. Name of your file

  2. Decide your symbol

  3. Specify the decimal

  4. Confirm how it will divide

  5. Security and protection

All ERC-20 tokens have a built-in digital purse function, which means that anyone with the token can protect it by storing it in their purse. This allows token holders to maintain full control over their digital assets, rather than leaving them in a bag.

  • Profitable development

Much time, effort, and money have been invested in developing the ERC20 token development standard — it would be incredibly expensive to try to replicate it. All the hard work has been done for you, which means your developers can easily create a token that offers a great user experience without all the associated costs.

How are ERC-20 tokens standardized?

There is a selection of functions and events that a token must complete to obtain the ERC-20 standardization. If you fulfill the minimum functions, it will guarantee the safety of your token, its holders and the Ethereum blockchain. If you cannot provide what is listed below, you will not be able to create an ERC-20-compliant token.

  • Total offer: This is the total number of chips to be issued.

  • Balance: How much of the token is in an owner’s account?

  • Transfer: Automatically executes transfers from a certain number of tabs to a preselected recipient address.

  • Transfer from: Same as the previous one but specifying the address from which the operation comes, not that of the recipient.

ETH AND ERC-20: What’s the difference?

ERC-20 is developed to be used in the Ethereum blockchain. However, this does not mean that it is the same as the Ethereum cryptocurrency. Eth or Ethereum is the native token used by the Ethereum blockchain to process a transaction on the network.

ERC-20 is used as a standard to create fungible tokens enabled for smart contracts that can be used in the Ethereum ecosystem. ERC-20 is the foundation of most cryptocurrencies that use Ethereum as the host blockchain.

Bottom line: What are ERC-20 tokens?

ERC-20 tokens are the standard for creating cryptocurrencies compatible with smart contracts hosted on Ethereum’s blockchain. Before its existence, anyone who created new tokens had to find creative ways to exchange them with each other. It was a long and complicated process. Now anyone can create an ERC20 token generator that is interchangeable with any other ERC-20 token.

Harnessing the power of Ethereum’s blockchain and ERC-20 tokens, developers, projects, and cryptocurrency communities can create viable tokens cost-effectively and quickly.

These tokens allow for a more interconnected and viable Ethereum ecosystem, providing the platform for projects to start, prosper and expand.