ERC20 token Standard

A Comprehensive Guide to the ERC20 Token Standard.

While this crypto revolution continues to change the virtual and the real world, the ERC20 token standards are playing a big part in it. Then what is the ERC20 token? The ERC20 token standard has become crucial in the Ethereum network, due to its applications in decentralized finance, governance, and more.

ERC20 tokens are digitized tokens that live on the Ethereum blockchain and adhere to those standards. The Ethereum blockchain is built specifically for smart contracts, virtual contracts that can be programmed to execute automatically when certain conditions are met.

The ERC20 token standard provides a safe and reliable way to contact strangers on the Internet, working with the scope of smart contracts, intending to make traditional contracts less expensive and more secure at the same time.

In this blog, we deep dive into the ERC20 token standard from scratch and why is it important. How does it work? Everything is detailed. Let's dive in together.

What is the ERC20 Token?

ERC20 tokens are a form of tokens that can be issued on the Ethereum blockchain and represent a set of standards and rules that cryptocurrencies can adhere to. ERC20 is a standard for creating and deploying smart contracts on the Ethereum network and networks that use the Ethereum Virtual Machine.

ERC-20 tokens play an important role in the blockchain sector because they can represent various assets such as reputation points, digital currencies, shares in a company, and other physical goods.

Ether or ETH is the native cryptocurrency of the Ethereum network, an ERC20 token represents a specific standard or set of rules that developers can follow to create Ethereum-based tokens.

The ERC-20 standard is crucial because it provides a familiar interface for tokens, reducing confusion and ensuring compatibility between various tokens on the Ethereum network. The versatile and adaptable nature of the Ethereum standard allows developers to create tokens that can be used for other products and services.

How Does ERC20 Token Standard Work?

ERC20 is a standard protocol, not a program or software. The ERC20 protocol regulates the creation of new tokens, ensuring that they meet the required technical specifications. If a token does not conform to the appropriate technical standards defined by ERC20, it will not fit the definition of an ERC20 token and therefore, will not be issued on Ethereum.

The ERC-20 standard defines a set of rules and events to be implemented in a smart contract. These functions help developers transfer tokens, check token balances, and manage token distribution, among other capabilities. ERC20 is similar to HTTP, the Hypertext Transfer Protocol used for websites.

It may help to think of ERC20 as analogous to HTTP, the hypertext transfer protocol used for websites. HTTP defines how messages on the internet are formatted and transmitted and how servers and browsers should respond to various commands. ERC-20 ensures that each token created on the Ethereum blockchain follows a specific structure, allowing for seamless interaction with various applications, wallets, and exchanges. The Ethereum standard simplifies token management and removes the barrier of compatibility issues between different projects in the ecosystem.

Now you might be wondering why the Ethereum blockchain stands out from the rest of the blockchain. No more confusion, compare it with other blockchains right now : Comparison of solana polygon ethereum

Top and Popular ERC20 Tokens

ERC20 tokens have reached mainstream adoption in the Ethereum ecosystem, and most of the tokens for the preceding applications conform to the ERC20 standard. These include:

USD Coin (USDC): A stablecoin pegged to the US dollar that provides price stability in the volatile world of cryptocurrencies.

Chainlink (LINK): A utility token used to pay for services on the decentralized Oracle network.

Maker (MKR): A governance token that gives voting rights in the MakerDAO ecosystem, influencing decisions related to the DAI stablecoin.

Basic Attention Token (BAT): A utility token for the Brave Browser ecosystem that rewards users for viewing ads and supporting content creators.

Decentraland (Mana): A virtual currency used in the Decentraland virtual world to purchase virtual land, items, and services.

Aave (AAVE): AAVE is a governance and utility token for the Aave DeFi platform. These allow owners to participate in decision-making and earn staking rewards.

0x (ZRX): A utility and governance token for the 0x protocol that facilitates decentralized token trading and exchange.

Enjin Coin (ENJ): A token used to create, manage, and trade blockchain-based virtual assets for video games and other digital experiences.

Advantages of ERC20 Token Standard

The ERC-20 token standard presents several benefits for making fungible tokens on the Ethereum blockchain.

1. Standardization:

ERC-20 defines a common set of rules and practices for token creation, simplifying the development process and ensuring consistency across different tokens. ERC-20 tokens explore the strength of Ethereum's smart contracts, meaning they allow for complex, automated transactions and decentralized applications with ease. Because ERC-20 provides a standardized framework, developers can save time and resources by focusing on the unique features of their token instead of building from scratch.

2. Seamless Interoperability:

ERC-20 tokens can easily interact with various wallets, exchanges, and decentralized applications (dApps) on the Ethereum network, increasing their usability and accessibility. As the most popular token standard, ERC-20 simplifies integration with third-party services such as exchanges, payment processors, or portfolio trackers.

3. High Security:

The ERC-20 standard has been extensively tested and reviewed by the Ethereum community, providing enhanced security and reliability for compliant tokens.

4. Efficient Programmability:

ERC-20 tokens can be tailored to a specific purpose or function, making them suitable for a wide range of applications, from utility tokens to stablecoins and governance tokens. ERC-20 tokens can incorporate programmable features such as automatic tips, staking tools, or token burns, promoting creative business standards and use points.

5. Blockchain Transparency:

The transparent and immutable nature of the Ethereum blockchain allows ERC-20 token transactions to be easily tracked and verified, increasing trust and reducing fraud. ERC-20 tokens run on the decentralized Ethereum network, reducing reliance on central authorities and promoting trustless, peer-to-peer transactions.

6. Borderless Transactions:

ERC-20 tokens facilitate seamless, borderless transactions without the need for intermediaries, making them suitable for international remittances, global crowdfunding, and cross-border payments. Anyone with an Internet connection and an Ethereum wallet can easily access, trade, and use ERC-20 tokens, lowering barriers to entry and enabling global participation.

7. Cost-effectiveness:

ERC-20 tokens are more cost-effective to create and manage than traditional financial instruments or alternative blockchain tokens because they leverage Ethereum's existing infrastructure.

8. Rapid Innovation:

The widespread adoption and diversity of ERC-20 tokens have led to rapid innovation in the blockchain and cryptocurrency space, leading to new financial products, services, and decentralized applications.

Best Use Cases for ERC-20 Tokens

Currently, we comprehend the basics of the ERC-20 standard. Let's dive into its different use cases and applications in the web3 world.

Stablecoins: Tokens pegged to traditional currencies are stablecoins, such as the USD Coin (USDC).

Governance Tokens: Tokens that give holders voting rights in decentralized organizations.

Utility Tokens: Tokens that provide access to a project's platform or services, such as Basic Attention Token abbreviated as BAT for the Brave Browser ecosystem.

Asset-backed tokens: Tokens representing ownership of physical or digital assets such as tokenized gold or real estate.

In-game currencies and items: ERC-20 tokens can be utilized for virtual currencies or items within video games, enabling the control of in-game economizing.

Cut network congestion and gas fees with the ERC1155 token standard and start moving in an up-to-date way to innovate or think more broadly about your latest token-based projects. Make your tokens both fungible and non-fungible with the advanced ERC1155 token standard. If you want to explore more about ERC1155 click here : ERC1155 token standard

How to Efficiently Store ERC20 Tokens?

To hold ERC20 tokens, users need an ERC20 wallet like any other crypto. But the important thing is to ensure that the crypto wallet in question supports tokens of this nature. Fortunately, some wallets are specifically designed to store ETH and ERC20 tokens.

Wallets like these can also be used to interact with different blockchain-based outlets such as DeFi apps and NFT marketplaces. However, when storing crypto in any wallet, it is considered good practice to back up your private keys and seed phrases. Giving someone else access to your keys or keys may allow them to take ownership of all crypto in that wallet.


In short, the main thing you want to know about the ERC20 standard is that it provides a set of standards on the widely used Ethereum network. In some ways, It helps the crypto space regulate itself and operate efficiently.

The ERC20 token standard represents a set of standards and rules used on the Ethereum blockchain for creating tokens that are issued on Ethereum.

ERC20 provides a standardized framework for creating and managing a variety of digital assets. With their versatility and ability to interact with many platforms and applications, ERC-20 tokens have changed the way value is transferred and consumed on the web3 world.


Get all the latest posts delivered straight to your inbox.
blog author

About Author

Yokesh Sankar

I am Yokesh Sankar. Co-Founder of BlockchainX, My vision and time to offer the best products for our clients without apprehensions at economic rates.



Our Latest Compilation On The Market

Let's Talk

Name *
Debug: fill fields
Report abuse
Powered by Bitrix 24