Exploring ERC-20 Tokens The Most Famous Token On The Ethereum Blockchain
16 June 2022
When researching crypto space, you occasionally encounter the term “ERC-20.” It is usual to not comprehend what something is, especially if you are a beginner. ERC-20 tokens are a well-known technical standard for any smart contract implementations on the Ethereum blockchain that employ fungible tokens, making it one of the most important smart contract standards on Ethereum. What significance does the ERC-20 token meaning?
In this post, bePAY will introduce you to what the ERC-20 token means as well as the ERC-20 standard. How do ERC20 tokens work? and further in-depth information about ERC-20 tokens in the simplest way. Now let’s dive into it!
What Are ERC-20 Tokens?
What is ERC-20 token meaning on the Ethereum network, ERC-20 tokens are sets of “fungible” digital tokens. Each pair of ERC-20 tokens is distinguished by a ticker symbol, such as ABC or XYZ. For instance, there may be 1 million ABC tokens and 10 million XYZ tokens.
The number of ERC-20 token sets is measured in the hundreds due to the low volume barrier to entry for producing them (going to deploy a relatively simple ‘contract’ to the Ethereum network). As a result, the majority of collections have relatively little value. However, some are worth billions.
ERC20 tokens, like Bitcoin, Litecoin, and other cryptocurrencies, are blockchain-based assets that may be sent and received. The distinction is that these tokens are issued on the Ethereum network as opposed to functioning on their own blockchain. This indicates that they are hosted on Ethereum addresses and transmitted through Ethereum transactions.
To interact with ERC-20 tokens, ETH is required. For instance, if you wish to send 100 ABC tokens to Alice, you will need to attach a small amount of ETH to cover the transaction fees.
What are ERC-20 tokens?
>> Read more: What is “gas” and how do Ethereum transaction fees work?
ERC-20 establishes a standard set of standards for Ethereum tokens to adhere to within the wider Ethereum ecosystem, allowing developers to design how new tokens will operate within this environment. This also enables developers to precisely predict token interactions.
These rules govern the movement of tokens between addresses and the access of data contained inside each token. The ERC-20 standard originated from a 2015 proposal. It was integrated into the Ethereum protocol by means of an Ethereum Enhancement Proposal (IEP-20).
The ERC-20 refers to (Ethereum Request For Comments), while the number 20 represents the standard’s unique identifier to differentiate it from others. ERC-tokens are digital assets. They are developed, issued, and utilized identically to Bitcoins, with the exception that they operate entirely on the Ethereum blockchain. These tokens rely heavily on a specific smart contract that maintains track of the transactions involving that token.
The Ethereum community developed these standards, which consist of three optional and six required regulations.
- Token Name
- Decimal (up to 18)
What is the ERC20 standard?
- TotalSupply: This function defines the total supply of your tokens. When this limit is reached, the smart contract will prohibit the creation of more tokens.
- Balance of: This function indicates the number of tokens owned by a wallet address.
- Transfer: A mechanism that distributes a certain number of tokens from the total supply to a user.
- Transfer from: Is an additional transfer mechanism used to transfer tokens between users.
- Approve: This function examines if a smart contract is permitted to assign a certain number of tokens to a user, taking into account the overall supply.
- Allowance: This technique is identical to the authorized method with the exception that it verifies if a user has sufficient balance to transmit a certain number of tokens to another.
How Do ERC20 Tokens Work?
Using smart contracts, ERC-20 tokens are generated. Even merely for the generation of a set of tokens, the logic of smart contracts enables a number of intriguing use cases.
Rewards and reputation points can be represented with ERC-20 tokens as well as other types of value. Imagine, for instance, an online travel service that awards customers with points whenever they make a reservation through the site. These points might be redeemed for future reservations.
They might also provide holders with extra privileges like VIP service, a portion of the profits produced by the booking site, or even a voice in the governance of the platform. Importantly, the points (tokens) may also be traded with other individuals, a characteristic that gives them worth beyond the environment in which they were initially formed.
ERC-20 can also be used to represent tangible assets such as gold and real estate. However, when digital tokens are used to represent actual goods, it is difficult to preserve the relationship between the two.
How do ERC20 tokens work?
ERC-20 Token Characteristics
The most commonly used tokens on the Ethereum network are ERC-20 tokens. Known as utility tokens, they are intended to be used to pay for functions. Additionally, they may be used to pay for products and services. The following are some properties of ERC-20 tokens:
Fungible Each token’s code is identical, yet transaction histories may be utilized to identify and separate tokens. This implies that all transaction histories are traceable despite the same nature of each token’s coding.
Transferable: It is applicable for financial transactions and transferrable. They are malleable. ERC-20 tokens behave similarly to other cryptocurrencies. They are transferrable from one location to another, provided that the new location meets the conditions.
Fixed supply: There must be an established maximum supply of ERC-20 tokens. Some ERC-20 tokens could or might not have a fixed token supply. Its entire supply is intended to inform the ecosystem of the total number of tokens in circulation.
Main ERC-20 tokens characteristics
What Tokens Are In The ERC-20 Tokens List?
Numerous crypto novices are shocked by the prevalence of the ERC-20 tokens list. On a list of the top 100 digital currencies by market capitalization, there are several well-known currencies that adhere to the ERC20 standard:
Chainlink (LINK): LINK is an ERC-677 token that derives functionality from the ERC-20 token standard. This coin operates on a blockchain middleware that functions as a bridge between cryptocurrency smart contracts, data feeds, APIs, and conventional bank account payments.
Maker (MKR): Is an Ethereum-based utility token based on the Decentralized Autonomous Organization (DAO) that generates DAI stablecoin.
Tether (USDT): Is an ERC-20-based stablecoin that follows the USDT protocol. Consequently, the deposit address is an ETH address, and deposits and withdrawals occur on the ETH network.
Decentraland (MANA): The token underlying the Decentraland metaverse network, MANA, is burnt to obtain non-fungible LAND tokens representing parcels of virtual land.
APE coin (APE): In the Bored Ape Yacht Club ecosystem, APE is the utility and governance token based on the popular profile picture NFT collection.
ERC-20 tokens list
Which Wallets Contain ERC-20 Tokens?
Ledger Nano S (Harware Wallet)
Active development team, PIN, seed keys, and passphrases to safeguard ERC-20 tokens. It supports more than 20 cryptocurrencies on a single device and is developing more.
Atomic (Desktop Wallet+Mobile)
Atomic Wallet is the greatest software for ERC-20 tokens since it stores them all. Atomic connects to Ethereum block explorers and displays your token balance. Simply enter a contract address and all your tokens will be in one spot.
The software encrypts your private keys on your smartphone, so you have complete access and control over tokens. Keep your Atomic mnemonic seed phrase secure.
Trusted Wallet (Mobile Wallet)
Binance’s acquisition of Trust wallet has boosted its popularity. Trust wallet is for Ethereum and ERC20/ERC223 tokens. This wallet stores and protects your private key locally.
MetaMask (Web/Mobile Wallet)
MetaMask is a free Ethereum wallet. It’s an Ethereum-based wallet browser. It can store, transmit, and manage ERC20 tokens. MetaMask’s active development team developed it so you can always control your cash via the seed key you acquire after setup.
Top best wallet for ERC 20 tokens
>> Learn more reviews about MetaMask wallet
Trezor (Hardware Wallet)
Trezor is one of the earliest crypto hardware wallets, hence it supports all ERC20 tokens. Trezor has an OLED screen, a seed key, PIN code security, and passphrase features like Ledger. Trezor’s development team is active and well-respected. Trezor is another ERC20-compatible hardware wallet.
FAQs About The ERC-20 Token
How Can I Receive ERC-20 Tokens?
Send an ERC-20 token to your Ethereum address in order to get it. If you haven’t already observed, your ETH receive address is the same as your CRO address; thus, you must specify to the sender precisely which token you wish to receive.
How Can I Send ERC-20 Tokens?
By sending an ERC-20 token, the token contract is informed that a transfer is necessary. To perform this transfer, the contract requires gas and a fraction of Ether. You use ETH as the network charge when transmitting ERC-20 tokens for this reason.
This is also the reason why, when your ETH balance is equal to zero, you will not be able to select ERC-20 tokens from the send coin list.
ERC-20 tokens FAQs
How Many Existing ERC-20 Tokens Are There?
As of June 6, 2022, there are approximately 500,000 ERC-20 token contracts, according to a dynamic list compiled by Etherscan, an Ethereum data source.
The ERC-20 tokens have had a considerable impact on the cryptocurrency market. Not only are they responsible for the billion-dollar ICO business, but they are also increasing the prevalence of digital assets.
When freshly-minted tokens are issued, they can be added to exchange systems without any coordination between the cryptocurrency and exchange developers. However, only if you adhere to the ERC-20 standard. This will result in less risk, less complexity, greater consistency, and better liquidity of tokens, which will boost user confidence.
Enthusiasts have experimented with newer standards like ERC-223 and ERC-777, but ERC-20 is still the most popular. There is a strong likelihood that the ERC-20 protocol will soon be enhanced by the addition of features that solve vulnerabilities and existing token issues.