The ERC-20 standardizes the creation of fungible tokens on the Ethereum blockchain. A fungible token is one that can be swapped for another identical tokenвЂ”as opposed to non-fungible tokens (NFTs) which are not interchangeable.
The ERC-20 standard allows for different types of smart contract enabled tokens to be exchanged. Tokens, in this context, are a representation of an asset or something else that is not unique but can be transferred. The standard allows for tokens representing one thingвЂ”along with smart contractsвЂ”to be exchanged for a token representing another. Smart contracts are conditions written into code that execute different aspects of a transaction between parties.
In 2015, smart contracts became more popular, but several challenges had to be overcome. Many were produced because anybody could make a token. However, there was no method for ensuring that all of the various tokens might be generated, used, and exchanged. Without a defined method for creating and trading tokens, every app would require its own token, and users would have to figure out how to change them back and forth between hundreds of apps being created.
These famous digital currencies all use the ERC-20 standard:
- Tether USD (USDT)
- USD Coin (USDC)
- Shiba Inu (SHIB)
- Binance USD (BUSD)
- BNB (BNB)
- DAI Stablecoin (DAI)
- HEX (HEX)
- Bitfinex LEO (LEO)
- MAKER (MKR)
In 2015, developer Fabin Vogelstellar proposed ERC-20 as a way to standardize the tokens within smart contracts on the Ethereum blockchain. He submitted his proposal for discussion via Github page of Ethereum project as an (ERC). Since this was twentieth comment at that time, it got assigned with designation ERC-20.
In 2017, the proposal was approved and implemented as Ethereum Improvement Proposal 20 (EIP-20). Even though it has since been called ERC-20, this is simply because that was its name until Approval.
Because a request was authorized and carried out, smart contract tokens based on the Ethereum blockchain must meet this standard if they are to be interchangeable.
The ERC-20 standard, which is a set of rules for creating and managing digital tokens on the Ethereum blockchain, has several capabilities and events that a token must implement. Keep in mind that this standard also applies to smart contracts’ actions regarding the tokens being generated. The following are the minimum number of functions and information required by an ERC-20 compliant token (note the difference in capitalization, which is significant for coding purposes):
The total number of tokens that will ever be issued is known as the TotalSupply. To check an account’s token balance, use BalanceOf. Lastly, in order to perform a transaction using the token, first specify the number of tokens you’d like to Transfer and From which address it should come.
Allows a spender to withdraw a set quantity of tokens from a specified account, up to a certain amount Approve: Allows for the withdrawal of a specific number of tokens from a given account Allowance: Returned A certain number of tokens from the spender to the owner Transfer: An event triggered when an item is transferred (an event) Approval: A record of past events that have been permitted (an event)
The functions and events below are key for user/token implementation. In particular, they help calculate the total number of tokens in circulation, store and return balances, make transfer and withdrawal requests, grant approval for automated transfers, etc.
This set of capabilities and messages ensures that all Ethereum tokens of various kinds function in the same way in every location inside the Ethereum ecosystem. ERC-20-compliant tokens may also be utilized interchangeably.
The ERC-20 standard is a set of rules that all Ethereum tokens using smart contracts must follow. These rules cover areas such as how the tokens can be transferred, transactions are approved and users can access data about a token.
As a result, this token standard allows any developer to anticipate how future tokens will behave within the greater Ethereum system. This makes development easier for developers; they may continue working knowing that each current project won’t have to be restarted every time a new cryptocurrency is introduced. Furthermore, upcoming projects will not have to worry about compatibility with existing projects as long as the token adheres to the regulations.
The good news is that most token developers have followed the ERC-20 guidelines, meaning that a majority of tokens offered through Ethereum initial coin offerings are compatible with ERC-20.
The ERC-20 standard is for tokens in the Ethereum ecosystem. This has been adopted by many other blockchain platforms, including Binance Chain– a cryptocurrency exchange created from an Ethereum fork.
Binance developers established their own token standard for tokens generated on their blockchain. This standard is known as BEP-2 and is comparable to ERC-20 in that it specifies the creation of tokens for use on the Binance Chain.
Binance has also created a side chain that runs parallel to the Binance Chain, aptly named the Binance Smart Chain. This new invention is compatible with ERC-20 tokens, the Ethereum Virtual Machine, as well as itself; through a cutting edge standard called BEP-20, cross-chain compatibility is now easier than ever.