ERC-20

ERC-20 is a technical standard for creating fungible tokens on Ethereum. It defines a common rule set so tokens behave predictably across wallets, exchanges, and apps. Think of it as a shared playbook that helps everything talk the same language.

Purpose and origins

The standard was proposed by developer Fabian Vogelsteller in 2015 to make token behavior consistent inside the Ethereum ecosystem. With one blueprint, developers could launch tokens that work smoothly with existing tools instead of reinventing the basics each time.

How the standard works

An ERC-20 token is a smart contract that follows specific rules. Those rules cover things like how to check an address balance, move tokens from one address to another, and keep track of total supply. By sticking to these rules, different apps can integrate tokens without special-case code. 

Transfers and approvals

Beyond simple sends, ERC-20 supports approvals. A holder can approve a third party to move a limited amount of tokens on their behalf, which is how many DeFi apps handle swaps and payments. These patterns come from the standard’s required functions for transfers, allowances, and supply tracking.

Fungibility explained

ERC-20 tokens are fungible. One unit is interchangeable with any other unit of the same token, which makes them useful for currencies, points, and other identical-value items.

Where you see ERC-20 in use

Projects use this standard for a wide range of assets and utilities: stablecoins, governance and voting tokens, app credits, loyalty points, vouchers, and more. The shared format helped spark large token launches and on-chain fundraising because new tokens could plug into wallets and exchanges right away.

Wallets and fees

Most Ethereum wallets can store and send ERC-20 tokens. When you transact, you pay network fees in ETH, not in the token you are sending, because the token’s smart contract executes on Ethereum.

Relationship to other Ethereum token standards

ERC-20 became the foundation for other token types built on or learned from. Later standards, like those for non-fungible tokens, took cues from the idea of a clear, shared interface for smart contracts.