Among blockchain mainnets, platforms supporting smart contracts enable token issuance. For instance, Ethereum allows users to register tokens by deploying smart contracts. Since anyone can write and distribute smart contracts on Ethereum, token issuance is permissionless.
Ethereum hosts a vast array of tokens, including stablecoins, utility tokens, security tokens, and community-driven tokens. While issuers can create custom token formats, compatibility issues may arise during exchanges or wallet integrations. Hence, a standardized framework is essential for seamless interoperability.
The Need for ERC-20
ERC (Ethereum Request for Comments) refers to proposal requests within Ethereum. ERC-20, the 20th proposal, defines a standardized interface for token issuance, ensuring external accessibility. Today, ERC-20 remains the most widely adopted token standard.
Unlike Ether (Ethereum’s native coin), which resides in user accounts on the blockchain, ERC-20 tokens are managed by smart contracts. These contracts track token allocations per account, effectively serving as decentralized ledgers. Users control their token balances, while the contract guarantees asset integrity.
Example Scenario:
Alice sends Bob 10 ABC tokens via the ABC token contract. She signs a transaction with her private key, prompting the contract to verify her balance and execute the transfer. If different token contracts used inconsistent function names (e.g., "send" or "transmit"), interoperability would suffer. ERC-20 standardizes these functions to prevent such issues.
ERC-20 Specifications
ERC-20 defines the following functions (focus on names, not code):
function name() public view returns (string)
function symbol() public view returns (string)
function decimals() public view returns (uint8)
function totalSupply() public view returns (uint256)
function balanceOf(address _owner) public view returns (uint256 balance)
function transfer(address _to, uint256 _value) public returns (bool success)
function transferFrom(address _from, address _to, uint256 _value) public returns (bool success)
function approve(address _spender, uint256 _value) public returns (bool success)
function allowance(address _owner, address _spender) public view returns (uint256 remaining)Practical Example: USDT
- Name: "Tether USD" (via
name()) - Symbol: "USDT" (via
symbol()) - Decimals: Determines the smallest token unit (e.g., 6 decimals for USDT).
Core Functions Explained:
totalSupply: Total tokens issued.balanceOf: Checks an account’s balance.transfer: Moves tokens to another address.approve: Authorizes a spender to withdraw tokens up to a limit.allowance: Shows remaining spendable tokens approved by the owner.transferFrom: Permits approved spenders to transfer tokens on behalf of the owner.
Events:
ERC-20 includes two events to log asset movements:
event Transfer(address indexed _from, address indexed _to, uint256 _value)
event Approval(address indexed _owner, address indexed _spender, uint256 _value)These trigger during transfer or approve actions, providing transaction transparency.
Wallet Integration
Wallets display token details (name, symbol, balance) by querying ERC-20 contracts. Transfers rely on standardized functions like transfer or approve, streamlining development and user interactions.
Key Considerations
- Cross-Network Risks: Sending ERC-20 tokens to non-Ethereum addresses results in irreversible loss. Always verify the network compatibility.
- Blockchain-Specific Standards: Other networks (e.g., BEP-20, TRC-20) have their token standards. Understanding these prevents costly errors.
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FAQs
1. Why is ERC-20 important?
ERC-20 ensures interoperability between tokens, wallets, and exchanges by standardizing functions like transfers and balances.
2. Can ERC-20 tokens be mined?
No. ERC-20 tokens are minted via smart contracts, unlike mined cryptocurrencies like Bitcoin.
3. What happens if I send ERC-20 tokens to the wrong network?
The tokens become irrecoverable. Always confirm the receiving address supports ERC-20 tokens.
4. How do I check my ERC-20 token balance?
Use a blockchain explorer like Etherscan or a compatible wallet (e.g., MetaMask) by connecting your address.
5. Are ERC-20 tokens secure?
Yes, if the smart contract is audited. However, always research the token’s credibility before transacting.