If you've heard about ERC20 tokens on the Ethereum blockchain but found the technical jargon a bit confusing, don't worry! In simple terms, ERC20 is a guidebook that helps developers to create and manage tokens easily. Let's break it down further.

What is ERC20?

ERC20 is not a complicated code, but rather a set of guidelines proposed by Ethereum developer Fabian Vogelsteller in 2015.

These rules ensure that the token works smoothly within the Ethereum system.

Why is ERC20 Important?

Think of it as a universal language for tokens and applications. This makes life simpler for developers, allowing them to predict how different tokens and applications will interact.

ERC20 also defines how these tokens move within the Ethereum blockchain and how their details are recorded.

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How does it work?

In simple terms, ERC20 is a regulatory standard created as a guide for developers. These rules ensure tokens can operate smoothly within Ethereum. 

This token standard is widely supported by decentralized applications and services ( dApps ), making it easier for businesses and users to use the token across a variety of applications.

What Can ERC20 Tokens Represent?

ERC20 tokens are versatile. This token standard can represent digital assets such as coins, vouchers, gold certificates, and even voting rights in elections.

Many projects already use ERC20, making it a popular choice for creating digital tokens.

How Many Tokens Use ERC20?

The popularity of ERC-20 has soared. As of mid-2017, there were 5,500 ERC-20 smart contracts on Ethereum. Fast forward to early 2018, and the number exceeded 40,000.

Currently, there are over 160,000 ERC-20 contracts! This surge is related to interest in ICO crowdfunding and the widespread adoption of blockchain technology.

Not All Tokens Are The Same

While most tokens on Ethereum follow ERC20, there are some exceptions. Ether (ETH), Ethereum's native currency, predates that token standard.

To make ETH compatible, Wrapped Ether (WETH) was introduced, which is an ERC-20 token representing Ether. This allows users to trade ETH for other ERC-20 tokens on decentralized exchanges easily.

Technical Side

ERC20 is not just words, this token standard describes six functions that maintain the functionality of Ethereum-based tokens. These functions include how tokens move between addresses and key data such as symbol, name, and supply.

In short, ERC20 simplifies the creation and use of digital tokens on Ethereum, making it an important player in the blockchain world.

Whether you're a developer or just curious about blockchain, understanding ERC-20 will open the door to a world full of possibilities.

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DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.