ERC-20

ERC-20 tokens are interchangeable and operate within smart contracts on the Ethereum network. They have standardized functionalities that facilitate transfers, approvals, and balances, making them the foundation for DeFi, ICOs, and tokenized assets.

💡 Key Features of ERC-20 Tokens

• Fungibility – Every ERC-20 token of the same type has the same value and properties.
• Smart Contract Compatibility – Enables automation of transactions and interactions with DApps.
• Wide Adoption – Used for stablecoins, governance tokens, utility tokens, and DeFi protocols.
• Standardized Functions – Includes transfer(), approve(), balanceOf(), totalSupply(), and allowance() functions.

🏛 Example 1: USDC Stablecoin

USDC is an ERC-20 stablecoin pegged to the U.S. dollar, widely used in DeFi and crypto payments.

🏛 Example 2: Uniswap (UNI) Token

The UNI governance token, built on ERC-20, allows users to participate in Uniswap’s decentralized exchange governance.

📚 References

1. Ethereum.org – ERC-20 Token Standard

2. Investopedia – What Crypto Users Need to Know: The ERC20 Standard

3. Coinbase – What is ERC-20?

⚠️ Controversies & Misconceptions

• "All Ethereum tokens are ERC-20" – Ethereum supports multiple standards, including ERC-721 for NFTs and ERC-1155 for multi-token assets.
• "ERC-20 transactions are free" – Transactions require gas fees, which fluctuate based on network congestion.

🚀 Conclusion

ERC-20 tokens play a crucial role in the Ethereum ecosystem, powering DeFi, gaming, and tokenized assets. Their standardized nature ensures broad compatibility, though users must be aware of gas fees and potential contract vulnerabilities.

Related Terms

• Wrapped Token

  A wrapped token is a tokenized representation of a cryptocurrency or asset native to one blockchain, designed for use on a different blockchain while maintaining a value pegged to the original asset.

• Stablecoin

  A stablecoin is a type of cryptocurrency designed to maintain a stable value by pegging its worth to a reserve of assets, such as fiat currencies like the U.S. dollar, commodities like gold, or a basket of assets. This stability allows stablecoins to be widely used for transactions, trading, and decentralized finance (DeFi) applications.

• DEX (Decentralized Exchange)

  A decentralized exchange (DEX) is a platform that facilitates peer-to-peer trading of cryptocurrencies without a central authority. DEXs operate through smart contracts and decentralized liquidity pools, allowing users to trade assets without intermediaries.

• Gas Fees

  Gas fees are transaction fees paid to miners or validators on a blockchain to process and validate transactions. These fees compensate network participants for the computational resources required to execute transactions and smart contracts.

• ERC-721

  ERC-721 is a token standard on the Ethereum blockchain designed for non-fungible tokens (NFTs), enabling unique digital assets such as collectibles, art, and virtual real estate.