What is ERC20?
ERC20 is a technical standard used on the Ethereum blockchain for creating and managing digital tokens. It defines a set of rules that a token must follow to be compatible with wallets, exchanges, and decentralized applications (dApps).
Most stablecoins and popular tokens on the Ethereum network use the ERC20 standard.
How does ERC20 work?
The ERC20 standard establishes essential functions such as:
- transferring tokens between users;
- checking the balance of a wallet;
- approving token spending by third parties;
- monitoring the total number of tokens issued.
Thanks to these common rules, ERC20 tokens can be quickly integrated into the Ethereum ecosystem.
Examples of ERC20 tokens
Among the most well-known ERC20 tokens are:
These tokens operate on the Ethereum blockchain and benefit from the network’s security.
Advantages of ERC20
- High compatibility with wallets and exchanges.
- Simplified standardization and integration.
- High liquidity in the Ethereum ecosystem.
- Widespread adoption in the crypto industry.
Disadvantages of ERC20
- Transaction fees (gas fees) can become high during busy periods.
- Transactions are irreversible once confirmed.
- Requires holding ETH to pay network fees.
ERC20 vs other standards
ERC20 is used for fungible tokens, meaning identical and interchangeable units. For NFTs, standards like ERC721 or ERC1155 are used.
Frequently Asked Questions
Is ERC20 a cryptocurrency?
No. ERC20 is a technical standard for tokens created on the Ethereum blockchain.
Can I send an ERC20 token to any address?
You can send ERC20 tokens only to addresses compatible with the Ethereum network. Sending to the wrong network can result in loss of funds.
Is USDT an ERC20 token?
Yes. USDT exists on multiple blockchains, and one of the most used versions is USDT ERC20 on the Ethereum network.
Is ERC20 safe?
The ERC20 standard is considered safe and is used by thousands of projects. However, the safety of a token also depends on the smart contract implementing it.
Conclusion
ERC20 represents the standard that contributed to the development of the Ethereum ecosystem and enabled the rapid creation of thousands of compatible tokens. If you use stablecoins like USDT or USDC, you are likely already interacting with ERC20 tokens.