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What Is ERC -20 Token Standard?

By Kapil Rajyaguru

The ERC-20 token standard has been crucial in the development of Ethereum and blockchain technologies. Many different types of tokens are suitable for decentralized applications due to their adaptability, ease of use, and compatibility. ERC-20 will greatly impact other blockchain networks and continue to play a pivotal role.

ERC20 is the standard developers use to create and implement smart contracts on the Ethereum network. ERC20 tokens are digital tokens that meet the aforementioned criteria and are stored on the Ethereum blockchain.

Ethereum developers created the blockchain specifically for smart contracts. Ethereum developers created the blockchain specifically for smart contracts. This functionality enables the development of numerous new decentralized apps, resulting in the creation of multiple platforms and their respective currencies on the Ethereum blockchain. It is used by many of the most well-known decentralized finance (DeFi) apps and utility tokens. But in order for the network to accept developers’ tokens, they have to follow specific guidelines (ERC20).

Introduction To ERC-20 Standard

The Ethereum Blockchain uses the ERC-20 technical standard for smart contracts. Fabian Vogelsteller introduced the term “Ethereum Request for Comment 20” in 2015. On this blockchain, developers can create their own coins by following the ERC-20 standard. By giving different token contracts access to a similar set of interfaces and functionalities, this standard makes the design and deployment of tokens easier. Decentralized exchanges (DEXs) operating on Ethereum allow for the exchange of ERC-20 tokens among each other.

Developers may create and implement smart contracts, digital tokens, and decentralized apps (dApps) on the Ethereum Blockchain, a decentralized platform. For developers to create their own digital tokens on the Ethereum Blockchain, they have to follow the ERC-20 standard. These tokens stand for a variety of assets, such as stablecoins, security tokens, and utility tokens. ERC-20 tokens are fungible because users can exchange them for other tokens of the same kind and value.

For example, one ERC-20 token for a project has the same value as all other project tokens. This is because every ERC-20 token has the same characteristics, like a name, symbol, and decimals, in addition to having the same capabilities, such as allowing token transfers between addresses and balance verification.

ERC-20 tokens can represent any type of asset, such as security tokens, utility tokens, and stablecoins like Tether (USDT) and USD Coin (USDC). Businesses can use them to provide access to a certain service or product, start a loyalty program, or raise money for new projects.

To produce an ERC-20 token, developers must include six mandatory and three optional functions in their smart contract code, according to the ERC-20 standard. Among these roles are:

TotalSupply:

This function yields the total quantity of tokens produced for a certain project.

BalanceOf:

This method returns the number of tokens that a given address holds.

Transfer:

Tokens can be sent from one address to another using this method.

Approve:

This function allows an address to grant permission to another address to spend tokens on its behalf.

TransferFrom:

This function allows an address to accept tokens from another address that has authorized the transfer.

Allowance: 

The quantity of tokens that an authorized address is able to use on behalf of another address is returned by this function.

The contract code for ERC-20 tokens can have the following three optional functionalities added by developers:

Name: 

The function yields the name of the token.

Symbol:

The token’s emblem, which is usually a few letters or characters, is returned by this function.

Decimals:

The number of decimal digits into which the token may be split is returned by this function.

ERC-20 token contracts can have extra features and functions added by developers in addition to the six mandatory and three elective functions. Other features include things like time-based limitations on token transfers or exclusive reward programs for early adopters.

Interestingly, there are additional token standards like ERC-721 and ERC-1155, even though ERC-20 has emerged as the most popular standard for producing tokens on Ethereum. While each of these standards has unique properties and applications, ERC-20 is still the most extensively used and well-liked standard.

Interestingly, ERC-20 coins can’t operate without the Ethereum network. Senders must pay a modest amount of ETH (in the form of gas fees) when transferring an ERC-20 token from one address to another to cover the network’s processing costs.

To sum it up…

The Ethereum ecosystem and blockchain technology have advanced significantly, thanks in large part to the ERC-20 token standard. Its versatility, ease of use, and interoperability have made it possible to create a wide range of tokens that power decentralized apps. The ERC-20 standard will continue to be a vital building block, and its impact will spread to other blockchain networks in addition to this one. Anyone interested in blockchain technology and cryptocurrencies should understand ERC-20 tokens, as they will continue to influence digital asset ownership, gaming, and finance in the future.

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