The Ethereum fungible token standard is called ERC-20.Find out what it is and how cryptocurrencies can be minted with it.
Key findings:
- ERC-20 is a technical specification that offers guidelines for the creation, issuance, and use of fungible tokens on the Ethereum network.
- The purpose of token standards is to facilitate interoperability between smart contracts by ensuring that newly minted tokens are compatible with third-party services such as exchanges and wallets.
- The introduction of ERC-20 allowed developers to build on Ethereum, creating a network effect and becoming a driving force behind the ICO boom of 2017, which created hundreds of new tokens.
What does ERC-20 mean?
When it comes to token standards, ERC-20 is king. This technical standard was put forth in 2015 by one of Ethereum’s founders, Fabian Vogelsteller, for creating fungible tokens on the Ethereum blockchain. “ERC” stands for “Ethereum Request for Comments” and “20” is the number assigned to this specific proposal, which defines a set of rules for how tokens should be created, issued and implemented.
Fungible tokens are indistinguishable from one another and can be exchanged at any time. Many tokens are utilized to create ERC20 token standard, which has become a driving force of the entire Ethereum ecosystem, making up hundreds of thousands of contracts on the network .
What are Token standards?
Token standards are a category of smart contract parameters, which establish application-level guidelines for how a smart contract works on its underlying blockchain. A token standard more specifically addresses parameters such as token supply, transaction approval, and accessibility of token data.
The purpose of token standards is to facilitate interoperability by ensuring that newly created tokens can be exchanged for others of the same standard and are compatible with third-party services such as exchanges and wallets. In other words, ERC-20 is what ensures that users can buy, exchange and HODL the many cryptocurrencies built on this standard. Without this framework, programmers would create tokens using unique codebases and toolsets that could not interact with each other or with protocols in a predictable way.
Top 10 ERC-20 tokens to know
Although there are hundreds of thousands of ERC-20 tokens, there are several that stand out from the rest. Here are some of the most popular currently:
- Tether (USDT)
- Currency USD (USDC)
- Polygon (MATIC)
- Shiba Inu (SHIB)
- Uniswap (UNI)
- Cronos (CRO)
- Chain link (LINK)
- Dai (DAI)
- ApeCoin (APE)
- Wrapped Bitcoin (WBTC)
How do ERC-20 tokens work?
For ERC-20 tokens, interoperability with each other and with third-party services, such as the Crypto.com application and MetaMask, is achieved through the implementation of an application programming interface (API). This allows developers to fetch data on-chain about a token and use the data to trigger specific functions in their smart contract.
The API describes six main characteristics that an ERC-20 token must have:
- Data on the total supply of tokens.
- Data on the balance of tokens in an Ethereum wallet.
- Functionality that allows the user to transfer ownership of a token to another user.
- Functionality that allows smart contracts to transfer tokens on behalf of the owner.
- Functionality that sets a limit on the number of tokens a smart contract can withdraw.
- Functionality that allows external addresses to spend the token from a certain balance.
How Crypto Tokens’ Gold Standard Became ERC-20
Before the introduction of the ERC20 token development service standard, there was no common language for programmers to use when creating tokens on Ethereum. This meant they needed to build projects from scratch as well as custom blockchain bridges to exchange any token – both of which required technical expertise.
By lowering the barrier to entry for building on Ethereum, ERC-20 empowered programmers and gave them the confidence to know that their project would be interoperable with thousands of tokens and services, creating a network effect.
Furthermore, the fungible basis of the ERC-20 token standard is suitable for cryptocurrency, which has been and continues to be a prominent use case of blockchain technology. ERC-20 tokens can also be customized to include utilities for holders, such as voting rights and reward mechanisms.
The aforementioned factors led to ERC-20 tokens gaining popularity, paving the way for the boom in initial coin offerings (ICO) that began in 2017. With billions of dollars raised, a new generation of projects was launched during that period. , many of which have become mainstays of the cryptocurrency space.
How to buy ERC-20 tokens on Crypto.com
On the Crypto.com app, users can conveniently purchase ERC20 token development and over 250 other currencies using a credit/debit card , Apple Pay , Google Pay , or over 20 fiat currencies transferred from your bank account. To accomplish this, choose the token to be purchased and the payment option by tapping “Buy” on the home screen.
Lastly,
Will ERC-20 continue to adhere to its gold standard?
Ethereum’s original token standard, ERC-20, has played an integral role in the growth of blockchain projects – not just for the Ethereum network, but for the entire crypto ecosystem. Its widespread adoption has opened the door for developers to create decentralized finance (DeFi) products, games, exchanges and more around its standards, expanding the possibilities of decentralized technology.
Since the introduction of ERC-20, other token standards have been developed as alternatives or improvements. The most notable include:
ERC-777: This token standard, which is somewhat different from ERC-20, establishes guidelines for fungible tokens. Namely, their “backward compatibility” allows these tokens to connect to older wallets and enter the broader Ethereum ecosystem.
ERC-721: Developed on the Ethereum blockchain, ERC-721 is the standard for distinct, non-fungible tokens (NFTs), as opposed to ERC-20.Use cases include non-exchangeable assets such as digital artwork, physical property, and access keys.
ERC-1155: Tokens based on this multi-token standard may be fungible, non-fungible, or both. It builds upon the principles of both ERC-20 and ERC-721.
For those interested in understanding the token standards of other blockchain ecosystems, this University article has all the information.
Conclusion:
Due diligence and do your own research
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