Definition of ‘ERC20 - ERC20 is a set of protocols governing the creation, trading, and use of Ethereum tokens. It was introduced in 2015 as part of the Ethereum platform.

What is ERC20?

ethereum erc20

Definition of ERC20 — ERC20 is a set of protocols governing the creation, trading, and use of Ethereum tokens.

It was introduced in 2015 as part of the Ethereum platform to allow developers to create new applications on top of it without needing to implement their blockchain infrastructure. ERC20 layd the grounds for ERC1155, which is mainly used for NFTs.

An ERC20 token is an autonomous digital asset that uses smart contracts to operate outside the traditional financial system. There are currently around 442,647 ERC20 tokens in circulation. Ethereum is not the only blockchain platform that supports ERC20.

Any token that meets the requirements set forth by the Ethereum Foundation can be called an ERC20 token.

When you look at the cryptocurrency trading market and related spheres, you will notice that two major cryptocurrencies are ruling the scene right now: Ethereum and Bitcoin. Ethereum is a purely blockchain-based decentralized platform for digital smart contracts, available for creating distributed apps and developing independent programs.

On the other hand, Ether (ETH) is a token of the larger Ethereum system, which can be seen as a currency to pay for using the computational power of the machines processing your applications and contracts within the Ethereum environment.

One of the main reasons that ERC20 tokens are so popular is that they allow developers to create applications on top of the Ethereum platform without building their blockchain infrastructure. This makes them much more accessible and affordable for most businesses, as well as gives them a wider range of opportunities to be adopted by mainstream consumers.

Additionally, many investors see these types of tokens as a safer investment option than traditional cryptocurrencies, due to their regulated status under the SEC.

Structure of an ERC20 Token

Most tokens created on Ethereum will conform to the ERC20 structure. There are six functions of an ERC20 token: transfer, total supply, allowance, approve, transferFrom, and balanceOf. The transfer function allows token holders to send tokens to other addresses. On the other hand, the balanceOf allows the ability to query a token holder’s total supply and its remaining amount of tokens. The balanceOf function is the most important, as it allows token holders to query the balances of other contracts in their wallets.

The total supply function provides information about the total token supply. The transferFrom function executes the transfer of a specified number of tokens from a specified address. The Approve function allows a spender to manage their finances by withdrawing a set number of tokens from a specified account, while the Allowance function allows a set number of tokens to be transferred between a spender and an owner.

History of ERC20

ERC20 tokens were originally developed as a way to give developers a more secure way to store and transfer Ethereum tokens. They were first proposed in 2015 by Fabian Vogelsteller. ERC20 tokens were never meant to be used as actual currencies by the public.

They were only intended to represent tokens for a company or project. Since ERC20 is open source, it allows developers to easily create a wide range of tokens on the Ethereum network. This has led to the explosion of ICOs (Initial Coin Offerings) in the cryptocurrency market.

A lot of the ICO tokens listed on exchanges are considered ERC20 tokens. ERC20 tokens are also commonly referred to as Ethereum tokens or ETH tokens. They can be used as a way to transfer value between participants in a distributed network.

To create a standard for Ethereum, a developer or group of developers must submit what is known as an Ethereum Improvement Proposal (EIP). This proposal must include a clear description of the new functionality, as well as the specific protocols and standards it will adhere to. Once it is approved by a committee, the EIP becomes an ERC.

The ERC20 Token provides users with unique potential by decentralizing and implementing the "Internet of money." Transactions are borderless and not limited by time, making it a powerful tool for users around the world. This makes it to be suitable, in the long run, to serve as a fundamental basis of the financial and non-financial world.

Is ERC20 the same as ETH?


ERC20 and Ether are two very different concepts.

ERC20 tokens are unique digital assets that keep track of who owns how many tokens and are created on the Ethereum blockchain using a different protocol.

These tokens can be stored in the same ETH address as ETH and other types of tokens created on different protocols.

The functionality of an ERC20 token is dependent on the smart contract that it uses. Whenever someone transfers tokens around, the balance of one token decreases, and the balance of another token increases inside the token's smart contract. This type of sub-assets is called Tokens. The native asset on the Ethereum blockchain is Ether(ETH) which is often referred to as a coin. So, the basic difference between ERC20 and ETH is, ERC20 tokens are issued on the Ethereum network, unlike coins like ETH that run on their own blockchain.


Can you swap ERC20 to ETH?

ERC20 tokens are based on the Ethereum blockchain, so you can easily swap them for ETH. For instance, Uniswap is a protocol on Ethereum for swapping ERC20 tokens. Any token can be added to Uniswap by funding it with an equivalent value of ETH and the ERC20 token being traded. You’re going to need some ETH in your balance to pay for any transaction fees, as well as something to trade for the ERC20 token you want. This might be ETH or another ERC20 token.

How much is ERC20?

The price of ERC20 tokens is determined by the supply and demand on the market. ERC20 is currently trading at the rate of 1 ERC20 to $0.028

Join Hashnode - the dev community of over a million active developers.

Over 100,000 tech blogs and growing. Be a part of an active community of developers, tech enthusiasts and creators. Blog on a personal domain, share ideas, and connect with the global tech community.

Global map