What Is the ERC-20 Token Standard?
The ERC-20 token standard is a set of rules and guidelines that defines how a token should function on the Ethereum blockchain. Introduced in 2015 by Fabian Vogelsteller, ERC-20 has become the most widely adopted token standard in the Ethereum ecosystem.
ERC-20 tokens are fungible, meaning that each one is interchangeable with another token of the same type. This standard ensures that all ERC-20 tokens on the Ethereum blockchain follow a common set of rules, making them compatible with various wallets, exchanges, and decentralised applications (dapps).
The ERC-20 standard specifies six mandatory functions that a token contract must implement: totalSupply, balanceOf, transfer, transferFrom, approve, and allowance. These functions enable token holders to transfer tokens, check their balances, and approve others to spend their tokens on their behalf.
What Is ERC-20 Used For?
The ERC-20 standard also allows token creators to add additional optional functions to their token contracts, such as name, symbol, and decimals, which provide information about the token.
This standard has revolutionised the world of blockchain by enabling the creation of countless utility and security tokens. ERC-20 tokens have been used in various applications, including initial coin offerings (ICOs), decentralised finance (DeFi) platforms, and gaming ecosystems.
Despite its popularity, the ERC-20 standard has limitations. For example, it does not support advanced features like atomic swaps or privacy enhancements. However, these shortcomings have led to the development of other token standards to cater to specific use cases, including ERC-721, representing ownership of non-fungible tokens, as well as ERC-1155 (for both fungible and non-fungible tokens).