ERC20 has recently been a buzzword in the Crypto world because it is associated with ICOs and crowdfunding firms. ERC20 standard is highly reliable in the Ethereum space because it has been the most common way for new tokens to be created in the cryptocurrency world. What Is ERC20, and why is it valuable in the Ethereum ecosystem? That we will find out in this article.
What is ERC20
ERC-20 is a standard protocol used to make and use tokens on the Ethereum blockchain, and it stands for “Ethereum Request for comments.” These tokens are fungible, meaning they have uniform values throughout the network and can be swapped. So, a Chainlink token at a location is equal to another elsewhere.
About The ERC20
Ethereum developer Fabian Vogelsteller came up with the idea for the ERC20 standard on Nov 19, 2015.
At the end of 2017, Vogelsteller and Ethereum co-founder Vitalik Buterin turned ERC20 into Ethereum Improvement Protocol 20 (EIP-20), which was made official.
Ethereum uses the ERC20 protocol to develop and power fungible tokens in its ecosystem. It implies that no token can be fungible and support smart contracts on Ethereum’s blockchain without being made with ERC20’s standard. Tokens are made on Ethereum’s network and encourage Smart contracts which include Shiba Inu, OmiseGO (OMG), and Chainlink (LINK). The above-listed assets and others within Ethereum’s ecosystem are compatible with crypto exchanges and electronic wallets. They can interact and transact with other assets that do not function with the ERC20 framework. However, only Ethereum-based wallets and Exchanges can support this cross-chain interaction.
How ERC20 Works
ERC-20 gives a list of functions for coding because they follow this standard. The three different kinds of these functions for codings are getters, functions, and events.
Getters do not change anything; they return information. The three getters are:
Total supply
Balance of
Allowance
Actions are executed by functions. In addition, it does three things:
Transfer
Approve
Transfer from
When an action happens, an event is sent out. Two things happen:
Transfer
Approval
How To Receive and Send ERC20 Tokens
Transferring ERC20 tokens between wallets requires specific protocols and checks. However, not a challenging process. Let us see how ERC20 assets are sent and received.
How To Receive An ERC20 Token
The first rule of thumb to receiving a token is confirming if your crypto wallet supports and lists it. It is recommended when receiving airdrops because they are vague assets that do not have listings on exchanges. Hence, wallets do not always support them. The above-listed wallets are non-custodial. They will aid you in keeping your wallet’s private keys on your device while you securely write out or store your 12 or 24-seed phrase.
You can retrieve your wallet using the seed phrases or the private key. However, you will lose access to the wallet if they get lost. The preferable wallets for ERC20 token reception are MetaMask wallet and MyEtherWallet because they are easy, secure, and highly functional with many tokens.
How To Send An ERC20 Token
ERC20 tokens can interact with every wallet address on Ethereum’s blockchain. You can send an ERC20 token by entering the receiver’s address in the recipient box and sending as much as possible. Transferring a token can only occur from two spots. They are:
- An electronic wallet like MetaMask and EdgeWallet.
- A centralized exchange like Kraken, Binance, and KuCoin.
Sending a token on the blockchain is not free because every transaction includes gas prices. Gas prices are charges users in a network pay to validate their financial activities and add the record to the blockchain. Miners issue the validations; hence, these fees go to them.
Gas prices are usually unstable because they increase with more demand and reduce when demands are less. There are reliable websites to check their live rates.
What can users do with ERC20?
- Transaction fees: Every Ethereum transaction, even those that involve tokens, has the option to pay a fee. If the network is busy, paying a fee called “gas” can speed up a transaction.
- Crowdfunding: Ethereum app builders can use tokens to raise money for their projects via crowdfunding.
- Voting rights: Tokens can be used to vote on decisions about a project. In this case, users have more power over each election based on how many tokens they have.
Frequently Asked Questions
What Is ERC20?
ERC20 is the standard for designing and deploying fungible and smart-contract-enabled tokens on Ethereum’s blockchain.
Is ERC20 A Token Or Coin?
ERC20 is a token, not a coin because it does not own a blockchain. It ranks among the most vital tokens within Ethereum’s ecosystem.
How Can I Get An ERC20 Token?
ERC20 tokens are obtained through swapping. You can buy an altcoin like BNB at any trusted exchange and trade it for an ERC20 asset. There is no exchange where you can directly buy ERC20 with your money.
Are ERC20 And Ether The Same?
They are two different concepts. ERC20 is a token protocol on Ethereum’s ecosystem through which other tokens function. However, it is not the same as Ether because Ether is the native coin of the Ethereum network. Ether works on a different protocol from ERC20.
What Is An ERC20 Network?
ERC20 does not own a network. Although it has similarities with cryptocurrencies like Bitcoin and Solana, it functions on Ethereum’s network. It can also be bridged to work on other networks.
What Is Solidity?
Solidity is a programming language that powers crypto contracts on different blockchains. It runs on the Ethereum Virtual Machine (EVM).
How Long Does An ERC20 TransactionTake?
An ERC20 transaction takes between 16 seconds and six minutes before validation. If the blockchain is very busy, it can take hours.
What Is An ERC20 Wallet?
An ERC20 wallet is a cryptographic program for storing your Ethereum tokens. It is secure and user-friendly.
Conclusion
ERC20 ranks among the most widespread and productive crypto standards. It is the foundation for several thousands of tokens in Ethereum’s ecosystem and is developer-friendly for establishing utility tokens for dApps.
It is necessary to reiterate that ERC20 and Ether are two different concepts. ERC20 is simply a design standard for fungible and smart-contract-supported tokens, while Ether is the indigenous token for Ethereum’s network. So, blockchain engineers can use the ERC20 to develop new tokens and name them differently.
