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What is ERC-20?

5:45 pm (176 days ago)
June 15, 2023

ERC-20 is a protocol defining the standard for tokens running on the Ethereum blockchain. These tokens are digital assets created on the Ethereum network, which are implemented and managed through smart contracts. Ethereum employs a fee called “gas” to facilitate each transaction on the blockchain. The creators of these smart contracts can generate tokens for specific purposes, which is where ERC-20 tokens come into play. 

ERC-20 tokens are digital assets created using smart contracts on the Ethereum blockchain that comply with certain standards. The abbreviation “ERC” stands for Ethereum Request for Comment, a standard established by the Ethereum community. The ERC-20 standard provides token developers with a specific structure and set of features, ensuring tokens can function harmoniously with each other and within the Ethereum ecosystem. 

Characteristics of ERC-20 Tokens 

ERC-20 tokens possess multiple features. These include: 

  • Digital Asset: ERC-20 tokens are recognized as digital assets and can be traded on the Ethereum network.
  • Token Standards: ERC-20 tokens must adhere to specific standards that dictate how tokens are transferred, how balance inquiries are made, among other features.
  • Contract Logic: ERC-20 tokens are controlled by smart contracts on the Ethereum network, which dictate how tokens are created, transferred, and utilized.
  • Wallet Compatibility: ERC-20 tokens are fully compatible with Ethereum wallets, allowing the tokens to be stored and managed within these wallets. 

The Emergence of ERC-20 

The advent of ERC-20 tokens is directly associated with the growth and evolution of the Ethereum network. Ethereum was designed to support not just cryptocurrencies but also a token economy. ERC-20 tokens gained popularity as a part of the Ethereum ecosystem, and many project tokens have been created according to this standard. 

As the Ethereum ecosystem expanded, ERC-20 tokens saw increased use. These tokens were commonly distributed through Initial Coin Offerings (ICOs) or token sales. Project developers can create their own ERC-20 tokens to raise funds and garner community support. 

ERC-20 tokens are digital assets created on the Ethereum blockchain, adhering to specific standards. This standard ensures their compatibility and seamless operation within the Ethereum ecosystem. Ethereum smart contracts govern and facilitate the transfer of ERC-20 tokens between wallets. This standard has fostered the growth and widespread adoption of token-based projects by supporting the token economy. 

ERC-20 Tokens 

As mentioned above, ERC-20 tokens are tokens created on the Ethereum blockchain using the ERC-20 standard. These tokens can be directly transferred on the Ethereum network and interact with smart contracts. Here are some notable ERC-20 tokens: 

  • Tether (USDT): USDT is one of the largest stablecoins globally, with its market value pegged 1:1 to the US dollar. It was one of the earliest ERC-20 tokens. 
  • Chainlink (LINK): LINK is the token of a platform that enables smart contracts to integrate external data from decentralized data providers. It is among the most well-known ERC-20 tokens. 
  • Uniswap (UNI): UNI is the token of Uniswap DEX, a decentralized exchange, and is distributed as rewards to liquidity providers. UNI is one of the most popular ERC-20 tokens. 
  • Aave (AAVE): Aave is a decentralized lending and borrowing platform. AAVE token functions as the platform’s native token and is an ERC-20 token. 
  • Compound (COMP): Compound is a decentralized lending and borrowing protocol. COMP token represents governance and voting rights within the platform. It is an ERC-20 token. 
  • Maker (MKR): Maker is the token of MakerDAO, a decentralized credit platform. MKR token is used to influence the platform’s governance and decisions and is an ERC-20 token. 
  • Synthetix Network (SNX): Synthetix is a platform where synthetic assets, such as fiat currencies or stocks, are replicated on the Ethereum blockchain. SNX token is the core token of the platform and is an ERC-20 token. 

The number of ERC-20 tokens is continuously increasing, each with its unique features and use cases. 

In conclusion, ERC-20 tokens are digital assets created on the Ethereum blockchain, following specific standards. The ERC-20 standard ensures their compatibility with each other and the Ethereum ecosystem. These tokens are controlled by Ethereum smart contracts and can be easily transferred between wallets. This standard has supported the growth and widespread adoption of token-based projects within the Ethereum ecosystem and continues to do so. 

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