ERC-20 Token Standard: A basic guide on what you need to know

ERC-20 is a technical standard used for creating and implementing tokens on the Ethereum blockchain. It stands for "Ethereum Request for Comments 20" and was proposed by Fabian Vogelsteller in 2015. The standard defines a set of rules and functions that a token contract must follow to be considered an ERC-20 token.

Key Concepts:

1. Fungibility:

   • Fungible means that each unit (or token) is identical to every other unit in terms of value and type. For example, 1 ETH (Ethereum) is equal to 1 ETH, no matter who owns it or how it's been used.

2. Interoperability:

   • ERC-20 tokens are standardized (means that they conform to a standard, which in this case, is the ERC-20 Token Standard), and because of that they can be used interchangeably across various platforms, wallets, and exchanges that support the ERC-20 standard. This standardization is what allows for the widespread use and acceptance of ERC-20 tokens in the Ethereum ecosystem.

3. How ERC-20 Tokens Work:

   • The ERC-20 standard defines a set of functions that all ERC-20 tokens must implement. These functions include:
     • totalSupply: Returns the total supply of the tokens.
     • balanceOf: Returns the balance of tokens held by a specific address.
     • transfer: Allows a token owner to transfer tokens to another address.
     • approve: Allows a token owner to approve another address to spend a specified amount of tokens on their behalf.
     • transferFrom: Allows a transfer of tokens on behalf of the token owner, using the allowance set by approve.
     • allowance: Returns the remaining number of tokens that an owner allowed to a spender.

To summarize, the ERC-20 is a crucial standard in the Ethereum ecosystem because it enables the creation of tokens that are easily exchangeable and interoperable. The fungibility of ERC-20 tokens ensures that they can be used in a wide variety of applications, making them the foundation for many dApps and other blockchain-based projects.