WHAT ARE ERC-20 TOKENS?

ERC-20 is originally a technical standard used to issue and implement Ethereum based tokens on it’s blockchain. Back in 2015 the token standard was proposed by an Ethereum developer named “Fabian Vogelsteller”. The standard describes a general set of rules that should be followed for all tokens to function properly within the Ethereum ecosystem. So, instead of considering ERC-20 tokens as a piece of code, we should actually see them as a standard that defines clearly how tokens deployed on the blockchain are to function for example: (how the tokens can be transferred, how transactions are approved, how users can access data about a token, and the total supply of tokens).

ERC-20 standard makes it easier for developers to predict more accurately what the interaction between different tokens and applications would be, like how new tokens will function within the larger Ethereum system, because it makes the tasks set for the developers easier.

Ether(ETH) as the main token of the blockchain doesn’t follow the ERC-20 token standard yet because it was created before the token standard was implemented and this is what lead to the creation of the token we know today as “Wrapped Ether (WETH)” which is an ERC-20 token that represents Ether (ETH) on a 1:1 scale (1ETH = 1 WETH) and is used to allow the trading of users assets with Ether(ETH) on decentralized exchanges which are predominantly for ERC-20 based tokens.

The ERC-20 standard rules allow you to;

  • get the totalSupply of tokens
  • get the balanceOf an account
  • transfer tokens to other accounts
  • let someone else transferFrom your account
  • approve spending by another party
  • grant allowance for tokens to be retrieved from a specific account.