What is ERC-20? A Guide to Ethereum Token Standard

ERC-20 is a cryptocurrency standard used to create and issue tokens on the Ethereum (ETH) blockchain. ERC stands for "Ethereum Request for Comment" - a concept similar to that designed by the Internet Engineering Task Force to communicate basic technical notes and requirements to a group of developers and users.

ERC-20 refers to a scripting standard used on the Ethereum blockchain. This technical standard defines a set of rules, actions, and steps required for an Ethereum token or smart contract to follow. In simpler terms, ERC-20 is a guideline that sets the conditions needed to create a new token or smart contract on the Ethereum blockchain. Tokens and smart contracts created on the Ethereum blockchain must comply with either the ERC-20 standard or an alternative standard.

ERC-20 Tokens

The ERC-20 standard has been one of the most preferred ways to create new tokens for some time. It's especially popular among ICOs and crowdfunding companies. Since its emergence, tens of thousands of tokens have been created and launched using the ERC-20 standard. Today, the ERC-20 standard provides a common set of rules for over 200,000 tokens and smart contracts.

So how and when did ERC-20 tokens emerge? What are the characteristics of ERC-20 tokens? We'll answer these questions in the rest of our article.

How did ERC-20 emerge?

The ERC-20 token standard was proposed by Ethereum (ETH) developer Fabian Vogelsteller in November 2015. It was officially recognized in September 2017. In other words, the ERC-20 token standard was created in 2015 and accepted by the Ethereum community in 2017.

To create such a standard in the Ethereum (ETH) ecosystem, the developer or development group wanting to create the standard must submit an Ethereum Improvement Proposal (EIP). The submitted EIP is then reviewed and approved by a committee. Thus, the proposed EIP becomes an ERC standard.

Tokens, smart contracts, and other features created on the Ethereum blockchain must comply with one of the approved standards. Besides ERC-20, there are alternative token standards on the Ethereum network such as ERC-721, ERC-621, and ERC-827. Each of these has different functionalities.

What are the characteristics of ERC-20 tokens?

The ERC-20 token standard is part of the Ethereum (ETH) blockchain. This means ERC-20 tokens are created, produced, and operate on the Ethereum blockchain.

Each ERC-20 token function is governed by a set of smart contracts. These smart contracts ensure that no trust in any person or organization is required for the token to function. When rules or conditions are met, the smart contract automatically executes the code. For example, when transferring an ERC-20 token to someone else, the user doesn't need to trust anyone to deliver it to the recipient.

The ERC-20 token standard describes certain functions of Ethereum-based tokens. These functions include how tokens are transferred between addresses and important data related to the token smart contract such as name and supply. In other words, the ERC-20 standard determines the identification information that a token must contain.

ERC-20 tokens have use cases such as crowdfunding, network governance, representation of physical assets, and payment of transaction fees. Sometimes decentralized application developers on the Ethereum network may want to raise funds for their projects. They can issue and sell ERC-20 tokens for this purpose. Through ERC-20 tokens, users can also participate in the governance of applications and other projects operating on the network. An ERC-20 token can represent digital assets like coupons, gold certificates, loyalty points, as well as physical assets like gold. Transaction fees in applications and projects can also be paid with ERC-20 tokens.

Sometimes projects also develop tokens compliant with the ERC-20 standard with new features to meet their own needs.

Most popular ERC-20 tokens

There are currently over 200,000 ERC-20 tokens operating on the Ethereum mainnet. Among the most popular ERC-20 tokens are Chainlink (LINK), Maker (MKR), Basic Attention Token (BAT), OMG Network (OMG).

How to buy ERC-20 tokens?

ERC-20 tokens created and operating on the Ethereum blockchain can be bought and sold on cryptocurrency exchanges where they are listed, in exchange for fiat money or other cryptocurrencies. Bitlo, one of Turkey's leading cryptocurrency exchanges, lists many popular ERC-20 tokens. You can buy and sell ERC-20 tokens through Bitlo in exchange for Turkish lira.