The Ethereum ERC20 has become the standard for the Ethereum token and the Ethereum blockchain. ERC stands for Ethereum Request for Comment. It is an essential part of the crypto world and one of the most popular tokens. Before the invention of it, each token had its unique smart contract and had to write a completely new code.
Ethereum non-fungible tokens are invented to create and issue smart contracts. The main thing is, it facilitates the creation of a broad network of tokens and applications. As opposed to traditional applications, they do not demand any halfway steps.ERC-20 is a unified token standard, which means that all tokens in the system are compatible with one another. It determines a common list of rules for ETH tokens to implement.
In a nutshell, the vast majority of Ethereum contracts are compatible with ERC-20. It contributes greatly to the making of applications and tokens that do not demand any halfway steps. Nowadays, it is impossible to imagine the Ethereum network without ERC-20. In this article am going to outline the Ethereum token.
The ERC20 ‘s token key to success
Although the native ERC-20 token is ETH (or “gas”), The Ethereum token standard has become so ubiquitous that some of the other digital assets that have different names are, in fact, ETH tokens (e.g., Chainlink and tether). Each token has its own purpose, such as giving the right to vote on issues that will define the outcomes of the project or rewarding buyers for accomplishing tasks.
These crypto tokens are sold via various offerings to raise funds for projects. However, some argue that ERC20 tokens once attracted too much attention, which resulted in unprofitable investments. The situation traces its roots to ICO in 2017.
They are up for grabs and can be created by anyone, but only companies and developers take charge of them. The reasons for their popularity are the following:
- These tokens are incredibly simple to operate
- They resolve a problem with the universalization of commands for cryptocurrency wallets and blockchain exchanges at a stroke. The set of these commands is small-scale and basic. It comprises rules of cooperation between different tokens and regulations of token purchase.
- It is the first successful effort to calibrate Ethereum tokens and establish the unique token standard
- No information can be transferred to a third party account
The Ethereum users have to pay transaction fees. They depend on how many ETH each operation needs.
What are smart contracts?
Smart contracts help to encrypt the conditions under which money can be transferred without access from third parties. It helps to keep track of created tokens. The Ethereum Virtual Machine helps to execute them. The ERC-20 token smart contract is created by programmers who use a coding language unreadable for computers. If all conditions are met, the code is instantly activated.
The possible problems with Ethereum
- Creation of ERC-20 smart contracts. They are of major importance, as they have direct control of tokens’ total supply, how they will circulate, when new tokens will be issued, etc. They help to transfer tokens quicker. Creating them is an energy-consuming and long process that demands a tight-knit team of developers. Failed contracts can cause heavy expenses.
- Compatibility issues. Creating tokens without a generic standard such as ERC20 can also cause extra expenses. In a nutshell, a wallet and an exchange platform are third-party services, and they need to be integrated with the help of a smart contract.
The information processing language (Solidity)
ERC-20 functions help external users get to know token balance and transfer currencies between Ethereum accounts using a special algorithm. The smart contract specifies two events – approval and transfer. They can be appealed to if a user owns the rights to pull out tokens from the Ethereum account.
Here is some detailed information on ERC-20 compulsory functions:
- Total supply is a function that defines the total supply of ERC-20 tokens
- BalanceOf function: displays the number of tokens on the current token balance of a user
- Transfer function: helps to transfer tokens from the total supply to another user
- Transferfrom function: is used to send tokens from one account to another
- Approve function checks the ability of the account to spread tokens
- The allowance function checks the balance on the account and makes sure there is enough balance to send tokens
One more important function is the public function which is available outside the contract.
What are the ERC20 tokens?
Apart from its native token ETH, there are over eight hundred tokens (as of the end of 2020) and more than three hundred fifty thousand token contracts:
- Binance coin (BNB)
- Tether (USDT)
- Chainlink (LINK)
- Dai (Dai)
- Maker (MKR)
- Consensus (SEN
What’s the use of ERC20 tokens?
- Collecting money: From time to time, the ERC-20 developers collect money for their projects. Then the investors get new coins before the new-made tokens enter the market
- Rights for voting. The more tokens a user possesses on their token balance, the more effect they have on project decisions.
- Exemplify real-world objects: A token can exemplify the ownership of valuable objects such as gold.
- Transaction fees: A user has to pay fees for all transactions. If the network is full of traffic, they can use ‘gas,’ which is subtracted from the owner’s tokens.
- Advanced features: Sometimes, ETH token’s functions aren’t enough for some users, so they have the possibility to create a new token with functions they need.
What lies ahead of Ethereum?
Although there are so many upsides to ERC-20, it is still far from perfection. Problems with standardization caused the theft of 3 million USD minimum. The second problem is the long processing time in times of high traffic.
Therefore, ERC-20 developers have to solve these problems and code. Moreover, the ERC-20 token is not the only standard in the Bitcoin world, although it is still the most popular – ERC777 and ERC223 can be considered as competitors. To hold up well, developers have to work hard on improvements.
The bottom line
The ERC20 token implementation is a big step forward in terms of standardization, although there are still certain disadvantages. Ethereum helps to transfer currencies without the commitment of third parties and greatly simplifies the creation of smart contracts, which saves developers much time.
Developers have recently launched Ethereum 2.0, which is made to fix some issues. Still, in order to avoid huge money losses as well as other drawbacks, there is a long way to go.
Is the ERC20 the same as ETH?
No, these notions are completely different. ERC20 is a unified set of standards for the Ethereum blockchain and the name for the type of coins. ETH is a native currency of the Ethereum blockchain.
Therefore, ETH can be considered as part of ERC-20 typed coins. In other words, ERC-20 is an ecosystem where ETH is used.
Do I need ETH to send ERC-20 tokens?
Yes, you will need ETH (or ‘gas’) to send ERC-20 tokens, as they are obligatory. The reason for it is that such tokens are issued on the Ethereum platform. To make sure you have enough ETH, check your wallet balance.
How to create an ERC20 wallet?
First, you have to conduct an analysis and choose one of many Ethereum-compatible wallets. Then you need to install a desktop or a mobile version of the wallet – MyEtherWallet can be a good option. Create a new wallet, set a password, print out your private key (or a recovery phrase), put it in a safe place or save as a document, and never share it with anyone. Then you will have to unlock your wallet. As soon as you do it, you can add tokens and start trading.
How to find token contract address?
Token Contract Address is a necessary field to fill out, and it requires some specific information. To get this information, go straight to the token’s website. Etherscan.io is a good service for checking it up. You will need to insert the token’s name, then click on it. Don’t forget to double-check all the information.