ERC-20 — What Does It Mean in Crypto?

In crypto, ERC-20 is the standard for creating fungible tokens on the Ethereum blockchain, defining a set of rules and functions that tokens must follow for interoperability and compatibility with wallets, exchanges, and decentralized applications (dApps). It ensures tokens are interchangeable and can interact within the Ethereum ecosystem, simplifying token development and fostering a unified network.

What ERC-20 means for Ethereum tokens:

• Standardization: ERC-20 sets a consistent framework for how tokens are created, transferred, and managed on the Ethereum blockchain.
• Interoperability: Tokens adhering to the ERC-20 standard can seamlessly interact with other ERC-20 compliant applications, making the ecosystem more interconnected.
• Smart Contracts: It's a specification for smart contracts that defines mandatory functions and events, ensuring predictable behavior for tokens.
• Ease of Development: By providing a pre-defined set of rules, developers can create new tokens more easily without having to build all the foundational logic from scratch.

Key Features of an ERC-20 Token:

• Functions: ERC-20 tokens must implement a specific set of functions, such as transfer() to send tokens, balanceOf() to check a token balance, and totalSupply() to know the total supply.
• Events: These are also required to communicate actions happening on the blockchain, such as Transfer() and Approval() events.

Why is it important?

• Widespread Use: The ERC-20 standard has become a dominant pathway for creating new tokens due to its ease of use and the benefits it provides to the Ethereum ecosystem.
• Ecosystem Growth: Its standardization helps to build a more uniform and interconnected network, supporting the growth of DeFi (decentralized finance) and other Web3 applications.
• Exchange Compatibility: Exchanges can easily list and support ERC-20 tokens because their functionality is standardized, expanding their reach and user base.