For creating interoperability between tokens developed on the Ethereum Network, the ERC-20 token standard was innovative.
The ERC-20 Ethereum token standard is a template for making fungible tokens that function with the Ethereum network as a whole. Unlike most traditional apps, Ethereum, or ether, is a cryptocurrency that permits the construction of a variety of applications, including tokens, that do not require the use of intermediate services.
The ERC-20 standard has infiltrated practically every aspect of the crypto world. ERC-20 tokens underpin a huge number of prominent tokens, like the stablecoin tether and the leading oracle service Chainlink.
ERC-20 tokens are digital assets that can be created by anybody, but are most commonly created by organisations and IT firms. Each token has a distinct purpose, such as allowing users to vote on decisions that affect the project’s future or rewarding customers for completing specified tasks. ERC-20 tokens are generally sold through various offers to raise early-stage cash for the underlying enterprise. Critics have previously claimed that crypto tokens have attracted too much attention, creating a platform for shady investments or outright scams. Many of the enterprises that raised funds during the 2017 ICO craze apparently failed to generate any returns to their investors.
ERC-20 standardises each token’s essential functionality, ensuring that any tokens developed with this framework are compatible with one another and with ERC-20-compliant services such as MyEtherWallet and MetaMask.
To see how this is useful, consider the following issues that token creators face when starting from scratch:
Smart contract creation: Smart contracts are crucial in deciding the token’s total quantity, how that supply is distributed, and the issuance timetable, among other things. They also take care of important tasks including checking holder balances and allowing token transfers. Writing smart contracts is a difficult and time-consuming procedure that normally necessitates the involvement of a team of experienced engineers. If the smart contracts are not coded appropriately, this can be incredibly costly and have disastrous consequences.
Wallet and exchange support: Creating tokens without using a well-integrated standard like the ERC-20 framework necessitates additional work to make them interoperable with third-party services like wallets and exchange platforms.
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ERC-20 Frequently Asked Questions
What distinguishes ERC-20 from other cryptocurrencies?
On a very high level:
The Ethereum network is used to deploy each ERC-20 token.
Smart contracts: Each token function is managed by a series of smart contracts, ensuring that the crypto token does not require the faith of anybody or anything. When criteria or conditions are met, the code runs automatically. When transferring a token to someone else, for example, the user does not have to trust anyone to deliver it to the intended receiver.
Developers must add numerous needed functionalities in every ERC-20. The following are the main components:
totalSupply is a function that calculates a token’s total supply.
balanceOf: displays the number of tokens held by a specific address.
transfer: a token’s ownership is transferred to another user.
At Ethhub, you may get more specific information.
What may a token be used for?
Crowdfunding: Ethereum app developers may choose to raise funds for their applications through crowdfunding. In exchange, investors receive newly created tokens at wholesale pricing before the formal launch.
Tokens can be exchanged for voting rights on project decisions. In this case, the more tokens a user has, the greater their power over each election.
Tokens can be used to symbolise the ownership of tangible objects, such as gold.
Fees for Ethereum transactions (including token transactions): Each Ethereum transaction (including token transactions) provides the option to pay a charge. If the network is overburdened, a fee called as gas might help speed up a transaction. The cost is deducted from the total amount of tokens owned by the user.
New features: Sometimes developers want a token to pay for the functionality of their applications, but the Ethereum native currency, ether, is insufficient. As a result, they construct a new token with the required capability.
What does the future hold for the Ethereum token standard?
Despite its many advantages, the ERC-20 standard is not without flaws. “Critical flaws” in the standard have been utilised to steal at least $3 million, and transactions can take a long time to process during periods of severe Ethereum congestion.
With ERC-20, developers must code around these and other concerns. Alternative standards such as ERC223 and ERC777, which may eventually replace ERC-20, have also been tested by developers for some time. For the time being, however, ERC-20 is by far the most common standard.
What is the total number of ERC-20 tokens?
According to a dynamic list from Ethereum data provider Etherscan, there are 829 projects based on the ERC-20 token standard and over 350,000 token contracts as of December 2020.
What are the coins that are ERC-20 tokens?
The ERC-20 framework has been used by a surprising number of major crypto projects, including:
affix a tether (USDT)
Linking Chains (LINK)
Binance coin is a cryptocurrency created by Binance (BNB)
US dollar coin (USDC)
Bitcoin that has been wrapped (WBTC)