ERC-20 is a widely-adopted technical standard used for creating and issuing smart contracts on the Ethereum blockchain. The acronym “ERC” stands for Ethereum Request for Comment, while “20” is the unique proposal identifier. This standard incorporates a set of rules that all tokens following it must adhere to, ensuring they can be exchanged and interact effortlessly within the Ethereum network.
Key Features and Rules
Standard Functions
ERC-20 defines six mandatory functions that must be included in every token smart contract. These functions facilitate the following operations:
- TotalSupply(): Returns the total supply of the token.
- BalanceOf(address account): Returns the token balance of a specific address.
- Transfer(address recipient, uint256 amount): Moves a certain number of tokens from the function caller’s address to the recipient’s address.
- TransferFrom(address sender, address recipient, uint256 amount): Moves tokens from one address to another with the necessary allowances.
- Approve(address spender, uint256 amount): Authorizes a spender to withdraw a specified amount of tokens from the owner’s account.
- Allowance(address owner, address spender): Shows the remaining number of tokens that the spender is allowed to withdraw from the owner’s account.
Additional Events
Two events are typically emitted by ERC-20 compliant tokens:
- Transfer: Emits details about token transfers.
- Approval: Emits when owner approval is granted for a spender’s use of their tokens.
Applicability and Use Cases
ERC-20 tokens are fundamental in the world of Initial Coin Offerings (ICOs), decentralized finance (DeFi), and various blockchain-based platforms. They serve multiple functions including:
- Digital currency representation (e.g., USDC, DAI)
- Utility tokens for accessing services or products
- Governance tokens granting holders voting rights in decentralized organizations
- Security tokens representing ownership stakes or other financial securities
Historical Context
The ERC-20 standard was proposed on November 19, 2015, by Fabian Vogelsteller and Vitalik Buterin. It was pivotal in kickstarting a wave of token creation and ICOs during the 2017 cryptocurrency boom.
Comparisons with Other Standards
ERC-20 vs. ERC-721
While ERC-20 tokens are fungible (each token is identical to another), ERC-721 tokens are non-fungible, meaning each token is unique. ERC-721 is commonly used for digital assets like collectibles and real estate.
ERC-20 vs. ERC-1155
ERC-1155 covers both fungible and non-fungible tokens, offering more flexibility and efficiency than ERC-20 and ERC-721. ERC-1155 also reduces the cost of deploying and transacting multiple types of tokens.
Special Considerations
ERC-20 tokens have faced criticism regarding issues such as lack of refund for failed transactions and security vulnerabilities. Developers often address these concerns through enhancements and additional checks in smart contract design.
FAQs about ERC-20
What is Gas in ERC-20 Transactions?
Gas is the fee required to execute a transaction on the Ethereum network. Each ERC-20 token operation consumes gas, paid in Ethereum’s native cryptocurrency, Ether (ETH).
How Can I Create an ERC-20 Token?
Creating an ERC-20 token requires writing a smart contract adhering to the ERC-20 standard rules and deploying it onto the Ethereum blockchain. Several development frameworks, such as Truffle and Hardhat, facilitate this process.
Are ERC-20 Tokens Secure?
ERC-20 tokens themselves adhere to a secure standard, but the overall security depends on smart contract implementation. Audit and thorough testing mitigate but do not eliminate risks of vulnerabilities.
Summary
ERC-20 is a crucial technical standard for Ethereum-based tokens, promoting interoperability and easy integration within the Ethereum ecosystem. Its simple yet versatile set of rules has made it the cornerstone of numerous digital economies, from ICOs to DeFi applications.
References
- Ethereum Improvement Proposal (EIP) 20: Link to EIP-20 Documentation
- Official Ethereum Documentation: Ethereum.org
- Vogelsteller, F., & Buterin, V. (2015). ERC-20 Token Standard Proposal. Ethereum Request for Comments 20.
