ERC-20 is a term you may have heard many times, but that doesn’t make it any clearer. If we talk about ERC-20 vs ERC-721, then they are completely different, because type-721 is NFT. The main advantage of the standard is its support for smart contracts. It is this versatility that sparks everyone’s interest in What Are ERC-20 Tokens.
ERC-20 is a standard that was created to advance the decentralized finance industry. Its main feature is versatility, as tokens of this standard can easily replace fiat currencies. The creation of many services, including products from Trident Group, has been made possible thanks to smart contracts, agreements, and future mechanisms.
All this magic wouldn’t work without smart contracts. Their role is complex, as they allow for the exchange of tokens, buying, and selling. Contracts themselves are secure, but they cannot do anything without a platform and certain unification. Thanks to the symbiosis of smart contracts, the ETH blockchain, and ERC-20, anyone can buy, sell, and order something by paying with cryptocurrency.
The history of ERC-20 began nearly ten years ago, in 2015. Anyone could create their own cryptocurrency, but there was a significant chance that the new coin would not work with the rest of the ecosystem.
The type name comes from two components. Fabian referred to his project on GitHub as Ethereum Request for Comment and added it to the discussion thread. As for the number twenty, it appeared because Fabian’s comment was the twentieth.
After the standard’s creation began in 2015, work on it continued until 2017. As a result, the work standard was accepted, and today, the vast majority of new tokens based on Ethereum are created in accordance with the ERC-20 requirements.
The ERC-20 token development was undertaken by Fabian Vogelsteller. The creation of this type was an attempt to address the issue of token diversity and to standardize them for proper functioning with smart contracts. Fabian’s work aimed to solve this problem, but at the time of the announcement, no one was yet aware of ERC-20.
Despite the ambitious nature of the task, Fabian managed to achieve significant success, and these achievements quickly became part of other projects. Thanks to the versatility of ERC-20, coins such as LINK, which is the native currency of Chainlink, were created. That is why today, the majority of projects use this type as a foundation for creating their own cryptocurrency solutions.
The token’s compliance with ERC-20 indicates that the asset contains all the necessary information that has been accepted by the Ethereum community. The ERC-20 token functions included in tokens that comply with the standard consists of:
Speaking about how ERC-20 tokens work, it is necessary to note the very idea. The ERC-20 idea lies in the unification and preservation of important information. The presence of data in a token is essentially the starting point that allows the cryptocurrency to be utilized. However, not all functions and methods are mandatory. For example, a token is not required to include data about its name, symbol, or the use of decimal places in order to meet the requirements of this type.
Thanks to the support of this function, owners of tokens that comply with the standard can transfer them to others. This allows tokens to be used on par with fiat currencies for purchases goods, sealing services, or investments in startups.
The purpose of this function is to return the tokens stored at a specific address. This is necessary for continuous information exchange with user applications and tools that display balance indicators. Examples of such applications include cryptocurrency exchanges, payment systems, and more.
The Total Supply Function is responsible for returning all the tokens that have been generated for the project. Essentially, this function allows for tracking the total number of tokens, as well as the number of burned coins and other related metrics. With this function, creators of cryptocurrency projects can analyze the situation and implement new solutions to ensure the system’s security.
The creation of the ERC-20 standard enabled hundreds of developers to launch their own projects, which today have a substantial impact on the market. The following projects can prove that the standard has fulfilled its purpose:
Thanks to the implementation of this type, holders of tokens that comply with the standard can freely use their cryptocurrency assets for payments or purchases.
Finding an alternative to ERC-20 is not so easy due to the standard’s popularity. If we talk about ERC-20 vs ERC-1155, then the opponent will not fit. Experts have managed to do so, and the results are already available in the table.
| Criteria | BRC-20 | ERC-20 |
|---|---|---|
| Blockchain | Operates on Bitcoin | Based in Ethereum |
| Creation and Management | Uses ordinal inscriptions in JSON | Created and managed by smart contracts |
| Use Cases | P2P transfers, remittance, integration into DeFi | Trading, lending, yield farming in DeFi and NFTs. |
| Future Prospects | Ecosystem is developing, especially for DeFi. | Widely adopted but facing scalability challenges. |
It can be said that ETH type somewhat surpasses the standard of the first cryptocurrency in the world, thanks to its widespread adoption and functionality.
The ERC-20 token creation and approval of this standard have led to the emergence of projects such as Chainlink, USDC, and many others. The principle of preserving universal information in tokens allows token holders to freely manage their assets.
When comparing Ethereum ERC with BRC-20, one can notice several differences. However, both standards strive to become universal solutions, thereby expanding the cryptocurrency industry. As of today, ETH type enjoys greater interest from developers, so the world will see many more crypto projects built on this standard.
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Ethereum token standards are a universal solution that enables the creation of tokens for interaction within the system. The standard is versatile and unites dozens of tokens across various projects.
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The reasons, as always, are evident and clear — versatility. Many tools and solutions operate under this standard. After that, it’s like a snowball: the higher the popularity, the more users there are.
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To understand this magic, just look at the market: demand is not decreasing. Developers are creating new useful tools and services, using the already popular standard as a foundation.
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Experts say that these coins are probably the most secure among all. It’s all about popularity; the more users there are, the more stable the system, so there’s nothing to worry about.
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Despite its versatility, tokens of this standard cannot be stored in all wallets. You can use solutions designed for the Ethereum blockchain to store your assets.
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No, because if they were unique, they couldn’t be used for purchases. It is precisely because they can be exchanged and are not unique that payment for services and purchases in many projects has become possible.
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Gas fees are charges to complete transactions on Ethereum, paid in ETH. High network demand can lead to increased gas fees for users.
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Yes, ERC-20 tokens are interchangeable, or fungible, meaning one token of a kind can replace another of the same value.
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The answer here can be very extensive, but to put it simply – use tokens for anything you want. Coins that comply with the standard can be used to buy or sell something.
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You can simply buy the necessary tokens by visiting an exchange. If you want to buy coins with dollars or other fiat currencies, a centralized exchange will suit you. If you want to spend other cryptocurrency assets, you need a DEX.