What is ERC-20 and How Does It Work?

The ERC-20 standard has made the system of tokens on the Ethereum network less confusing. Having it around has also made it easier to make your own digital asset. We know what ERC-20 is, how it works, and how anyone can make their own token.

ERC-20 Explained

ERC-20 stands for “Ethereum Request for Comments,” which means “a request for comments from Ethereum.” This is a standard that says how tokens created on the network of the first altcoin should work. It first showed up in 2015, and since then, more than 350,000 different tokens have been made from it.

In essence, ERC-20 is the Ethereum blockchain’s most successful attempt to standardize tokens. Before it came along, each digital asset on the altcoin network had its own smart contract. So, the people who made the digital asset had to write new code so that the new exchange or wallet could work with it.

Even though ERC-20 tokens are actually smart contracts in Ethereum and don’t have their own blockchain, the people who make them have a lot of options. All transactions with these digital assets go through the main Ethereum network, which is done through blockchain transactions.

Why ERC-20 tokens are necessary

We now know what an ERC-20 token is. Let’s talk about why we need them now. When creators of tokens choose the ERC-20 standard as their starting point, they simplified the process for everyone.

To make a new token, you don’t have to make a new blockchain. This saves time and effort. Instead, it will use the infrastructure that Ethereum has already built. Also, it is much easier to make your own token when there is already a set of rules for it.

Make sure there is as much interoperability as possible. If the token is made using the ERC-20 standard, it can be easily traded for other digital assets that use the same framework. Also, the people who made the token will be able to use apps that run on the Ethereum network.

This second fact became the foundation for projects like UniSwap. This is a decentralized exchange where two different ERC-20 tokens can be traded with each other. Also, this platform has a digital asset with the same name as its service that is one of the top 15 cryptocurrencies by market capitalization.

As for how ERC-20 tokens can be used, they can be used for many different things. For instance, the people behind the Brave project made a digital asset called BAT, which stands for Basic Attention Token. This token is given to people who use the Brave browser to see ads. BAT can also be given to people who create content.

BAT can also be given to people who create content.

What ERC-20 tokens are available?

As was said above, there are more than 350 thousand ERC-20 tokens in addition to BAT. Most of them crash as soon as they are launched and don’t cost anything. Vitalik Buterin, who created Ethereum, said this in 2017:

“It’s a well-known fact that 90% of new businesses fail. And everyone should agree on one more thing: 90% of the ERC-20 tokens on CoinMarketCap will lose all of their value.”

Buterin’s words mean that only about 10% of tokens are successful in the long run.

ERC-20 Wallets

If you want to keep your ERC-20 tokens for a long time, you’ll need to set up a cold wallet. Because it can be risky to store assets on the exchange that you don’t plan to trade soon, hackers often target trading platforms.

There are several wallets that can store ERC-20 tokens. Hardware storage from Ledger, Trezor, and KeepKey is one example. There are also many wallet apps, like MyEtherWallet, imTokenWallet, and many more.

The steps to making your own ERC-20 token

It’s now easier than ever to make your own digital asset based on ERC-20 and try to get into the top 10% of crypto startups that “may.” You can make your own token in just 10 minutes with many online tools. All of this is possible because the ERC-20 has a single form.

The following characteristics must be set on all tokens that are made according to the standard:

• Name. This is the name of the token that can be used to find it when making a smart contract or using an application on the Ethereum network.
• Symbol. This is the token’s short name, or ticker. With this setting, the token will be sure to work with the standard.
• The total supply. This is a parameter that controls the amount of tokens that can be made.
• Balance0f. With this function, you can find out how many tokens will be linked to a certain address. Most of the time, we talk about the address of the person who made the token.

The ERC-20 standard also describes two ways that network participants can send tokens to each other. The Transfer function is in charge of sending assets to investors who bought into the project before the ITO, or initial token offering. TransferFrom is needed to transfer tokens between network members.

There are two more functions, approve and allowance, that can be used to check whether a transaction is possible. The first sentence backs up the translation. The second step is to see if the sender’s address has enough money to pay for the transaction.

Also, the creator can set parameters, such as how many times the token can be split. To put it another way, what is the bare minimum of a digital object that can be transported and stored.