The ERC-20 standard has seeped into almost every corner of the crypto ecosystem. A large number of popular tokens, such as EOS, TRON, VeChain, Maker, BNB, Uniswap, etc., are actually tokens those work under ERC-20 standard.
- ERC-20 is a standard used for creating and issuing smart contracts on the Ethereum blockchain.
- Smart contracts can then be used to create smart property or crypto assets that people can invest in.
What Is ERC-20?
ERC-20 has emerged as the technical standard. It is used for all smart contracts on the Ethereum blockchain for token creation and implementation and provides a list of rules that all Ethereum-based tokens must follow. The ERC-20 code is opened-sourced.The main mission of developing the updated ERC standard was to simplify interactions with the ETH based wallets, exchanges and smart contracts. ERC-20 tokens are blockchain-based assets that have value and can be sent and received on the Ethereum network.
Every ERC-20 has several required features for developers that must be implemented. The main elements are:
- totalSupply: a function that outlines the total supply of a token.
- balanceOf: shows how many tokens a particular address has.
- transfer: transfers ownership of a token to another user.
- As of May 2021, there are 400,601 token contracts, according to a dynamic list from Ethereum data provider- Etherscan.
Pros and cons of ERC-20 tokens
Pros of ERC-20 tokens
- Fungible- each unit is interchangeable with another.
- Flexible- they can be used as in-game currency, in referral programs, as digital collectibles, or even in order to represent pieces of fine art and property rights.
- Popular- there is a plethora of exchanges, wallets, and smart contracts that are already compatible with newly-launched tokens.
Cons of ERC-20 tokens
- Scalability- an attempt to make a transaction at peak times results in high fees and delays.
- Scams- it takes minimal effort to create a simple ERC-20 token, that means that anyone can do it — for good purposes or for bad ones. As such, you should be careful with what you’re investing in.
ERC-20, ERC-1155, ERC-223, ERC-721 — what’s the difference?
ERC-20 is the first and the most popular Ethereum token standard.
Some of the less common standards are the ones used in non-fungible tokens (NFTs).
The ERC-721 standard, for instance, was used for the immensely popular CryptoKitties DApp. Such contract provides an API for users to mint their own non-fungible tokens and to encode metadata(images, descriptions, etc.).
The ERC-1155 standard can be considered as an improvement of both standards ERC-721 and ERC-20. It is a standard that supports both fungible and non-fungible tokens in the same contract.
Other standards such as ERC-223 or ERC-621 aim to improve usability. The former implements safeguards to prevent accidental token transfers. The latter adds extra functions for increasing and decreasing token supply.