If you are familiar with ICOs you have probably already heard about ERC20 tokens. The mention ‘ERC-20 compatible’ is not completely unfamiliar to you but you are not exactly sure of what this means? Here is a short article to explain it all simply.
ERC20 you say?
You might have heard about ERC20 tokens as mentioned with the Ethereum blockchain. Indeed the Ethereum blockchain allows for the creation of smart contracts that allow transfer of assets between two parties without the need for a middleman to guarantee trust.
ERC20 stands for “EthereumRequest for Comments 20” as it was initially published as a proposal of improvement on the Ethereum repository. ERC20 is a standard under which tokens have to be submitted, it allows definition of the behavior of new tokens on the Ethereum blockchain.
This standard revolves around 6 functions which can be recognized by other smart contracts on the Ethereum Blockchain. These functions include for example the way a token can be transferred, or the way the network can access information about this token(symbol,name, number available…). Using this standard is a real time-saver for developers as it provides more uniformity, less risk and complexity and also prevents them from having to code a whole token from scratch. With this standard, they have a base to start working from.
Some examples of ERC20 tokens
ERC-20 tokens are financial assets that can be bought or sold on exchanges, there are currently more than 650 ERC20 tokens registered on CoinMarketCap.comand more than 17,000 smart contracts registered with the ERC20 standard.
Among the most popular ones you can find EOS, TRON or BNB for example. Tokens can have uses as varied as the possibilities offered by the Ethereum blockchain. However, ERC20 is not the only standard for token, you can also come across the ERC223 and ERC721 which are still at the state of proposal but are trying to add features to the ERC20 standards.
So, now you know what the ERC-20 standard is and why it is important to have an ERC20 compatible wallet if you own such tokens, otherwise you will lose your tokens as the language used will not be readable. This standard allows is not the only one but is for now the most common one.