ERC-20

ERC-20 is the technical standard for fungible tokens created and used on the Ethereum blockchain.

What Is ERC-20 in Crypto?

ERC-20 is the technical standard for fungible tokens created and used on the Ethereum blockchain. It defines a set of rules and functions that a token contract must follow to be compatible with the Ethereum ecosystem, including wallets, exchanges, and decentralized applications (dApps).

ERC-20 tokens represent digital assets that can be sent, received, and stored just like ETH (Ethereum's native cryptocurrency), but they are created using smart contracts and exist as separate tokens on top of the Ethereum network.

How Does ERC-20 Work?

The ERC-20 standard consists of a smart contract interface that includes six mandatory functions:

  1. totalSupply – Returns the total supply of the token
  2. balanceOf – Checks the token balance of a specific address
  3. transfer – Moves tokens from one address to another
  4. approve – Allows a third party to spend tokens on behalf of the owner
  5. allowance – Checks how many tokens a spender is allowed to spend
  6. transferFrom – Executes a transfer using a previously approved allowance

By adhering to these standards, ERC-20 tokens ensure interoperability across the Ethereum ecosystem and reduce the need for custom integration by developers.

Why Is ERC-20 Important in the Crypto Industry?

1. Token Creation Made Simple

ERC-20 made it easy for developers to launch custom tokens, enabling thousands of projects, including ICOs (Initial Coin Offerings) and DeFi platforms.

2. Interoperability and Integration

Because ERC-20 tokens follow a universal standard, they can be seamlessly integrated with Ethereum-based wallets, dApps, and exchanges.

3. Foundation of DeFi and Web3

Many core protocols in the decentralized finance (DeFi) space — like Uniswap, Compound, and Aave — rely on ERC-20 tokens for governance, rewards, and utility.

4. Mass Adoption

The ERC-20 standard has become the most widely used token standard in the crypto world, with thousands of active tokens and billions of dollars in market value.

Notable ERC-20 Token Examples

  • USD Coin (USDC) - Fiat-pegged stablecoin for payments
  • Uniswap (UNI) - Governance token for Uniswap DEX
  • Chainlink (LINK) - Powers decentralized oracle networks
  • Aave (AAVE) - Lending and borrowing in DeFi
  • Basic Attention Token (BAT) - Reward system for digital advertising

 

ERC-20 is a foundational standard in the Ethereum blockchain ecosystem, allowing for the creation and seamless operation of fungible tokens across a wide range of crypto applications.