What is ERC-20?

Last Modified:
January 29, 2024

Image from moralis.io

Hundreds of fungible tokens run on the Ethereum network, and new ones are being created all the time. With so many available, it would be difficult to transfer, exchange, and store them in wallets if all of them work very differently from each other.

To ensure that these tokens are compatible with different applications, developers came up with sets of rules on how tokens should work. We call them token standards. Every new token developed on the Ethereum ecosystem must follow one of these standards.

The standard for all fungible tokens built on Ethereum is called Ethereum Request for Comments 20, or ERC-20. According to this standard, the smart contracts for fungible tokens must contain at least six functions, including:

  • listing the total number of a particular token existing
  • stating the amount of tokens owned by an account
  • allowing an account to send tokens to another account
  • allowing an account to spend tokens owned by another account
  • stating how many tokens one account is allowed to get from another account
  • moving the tokens from the sender to the recipient

Image from investinblockchain.com

The name ERC-20 came from the Ethereum network’s page where community members could suggest changes to improve the blockchain. The 20th proposal became the standard we now call ERC-20.

Popular examples of ERC-20 tokens include:

  • USDT
  • USDC
  • UNI
  • AAVE

Just as you can exchange one U.S. dollar for its equivalent amount in Philippine pesos, you can also swap one type of ERC-20 token (like AAVE) for its equivalent amount in another ERC-20 token (like USDT).

ERC-20 makes it easy for us to send and receive crypto using different wallets and platforms. It’s one of several standards that help make blockchain technology safer and more convenient to use.