ERC-20
ERC-20 is a technical standard used for creating fungible tokens on the Ethereum blockchain, defining a common set of rules and functions that a token’s smart contract must implement to ensure compatibility with the broader Ethereum ecosystem. The name derives from Ethereum Request for Comments number 20, the proposal number under which the standard was formally submitted and adopted by the Ethereum developer community.
The core value of the ERC-20 standard lies in the interoperability it enables. Before standardization, developers creating new tokens on Ethereum could implement their own unique code structures, making it difficult for wallets, exchanges, and other applications to reliably interact with every different token. By establishing a shared standard, including required functions like transferring tokens, checking account balances, and approving third-party spending, ERC-20 ensures that any wallet or exchange supporting the standard can automatically support virtually any ERC-20 token without needing custom integration work for each individual project.
This standardization has had an enormous impact on the growth of the Ethereum ecosystem. The vast majority of tokens launched during the ICO boom, along with countless DeFi tokens, governance tokens, and utility tokens used across decentralized applications today, are built as ERC-20 tokens. This shared foundation has allowed the broader Ethereum DeFi ecosystem to develop complex, interconnected applications, since protocols can confidently assume that any ERC-20 token will behave predictably according to the same well-established rules.
It’s worth distinguishing ERC-20 from other Ethereum token standards designed for different purposes, most notably ERC-721, which is used for non-fungible tokens, or NFTs, representing unique, non-interchangeable digital assets rather than identical, interchangeable units of value. Understanding the ERC-20 standard provides useful foundational context for anyone exploring the broader world of Ethereum-based tokens, decentralized finance, and the overall architecture underlying much of today’s crypto ecosystem.