The ERC-20 is crucial to the Ethereum network’s operations, but what is it? How does it work? Our guide to ERC-20 covers all you need to know.

ERC-20 is a technical standard utilized in the issuance and implementation of Ethereum tokens.

Fabian Vogelsteller, Ethereum developer, first discussed the standard in late 2015. It covers a list of rules that must be adhered to if a token is to function correctly in Ethereum. ERC-20 isn’t software or a piece of code – it’s best defined as a technical guideline or specification.

ERC-20 enables developers to more accurately predict how various tokens will interact with applications. Furthermore, it defines the way in which ERC-20 token transference occurs in the blockchain, as well as the consistent recording of their respective supply and address balances.

Essentially, ERC-20 provides developers with a set of instructions to follow to allow the Ethereum platform to function seamlessly. A range of dApps (decentralized applications) and services offer ERC-20 token support. This helps businesses and members of the Ethereum community to use them on numerous applications (crypto wallets, games).

Multiple tokens compliant with ERC-20 are deployed on the blockchain. They have their own implementations: tokens may be utilized to represent digital assets or goods that can be traded, depending on the approach. ERC-20 tokens can also be used to tokenize the right to vote in elections.

Thanks to the ERC-20 standard, it’s easier to make and issue digital tokens. This is likely connected to the growing interest in ICO crowdfunding events and blockchains overall. Numerous projects use the standard already, and more ERC-20 token contracts have emerged within a short space of time.

Approximately 5,000 ERC-20 smart contracts were on Ethereum’s network by the middle of 2017, but this had exploded to more than 40,000 in the first quarter of 2018.

While most tokens on the Ethereum network adhere to the standard, not all do. Ether (ETH) was made before the standard emerged, so it doesn’t comply with it (so far). The Wrapped Ether was made as a result: an ERC-20 token equal to one ETH. With the Wrapped Ether, users can trade their ETH to other ERC-20 tokens on decentralized exchanges.

The standard covers six functions maintaining certain features and functionalities of Ethereum-based tokens. These include how tokens get transferred between addresses, and data pertaining to smart contracts (e.g. name, supply, etc.).