What Is ERC-20?
Also known as: EIP-20, Ethereum Request for Comments 20
In short
ERC-20 is the technical standard that defines how fungible tokens are created and transferred on Ethereum and EVM-compatible networks; a large number of tokens, including stablecoins and governance tokens, use this standard.
The standard was proposed in 2015 by Fabian Vogelsteller and Vitalik Buterin. An ERC-20 contract implements common functions such as totalSupply, balanceOf, transfer, approve (spending permission), allowance (permitted amount) and transferFrom, along with the Transfer and Approval events. Thanks to this common interface, wallets, exchanges and DeFi protocols can support any ERC-20 token without additional integration.
ERC-20 enabled projects to easily issue tokens during the 2017 ICO (initial coin offering) wave. The Ethereum versions of USDT and USDC, as well as tokens such as LINK and UNI, are based on this standard. ETH, Ethereum's own currency, is not ERC-20; for this reason, WETH, the ERC-20 version of ETH, is used in DeFi applications. Standards such as BEP-20 on BNB Chain are similar to ERC-20.
The standard has known weaknesses. Unlimited spending approvals granted to DeFi applications can lead to the tokens in a wallet being drained if the relevant contract is hacked; revoking unused approvals reduces this risk. In addition, because the standard does not check whether the recipient can accept the token, ERC-20 tokens mistakenly sent to a contract address can be locked permanently.
Last updated: · This content is for information purposes only and is not investment advice.