ERC-20 is a standard interface for tokens, which are a type of digital asset on the Ethereum blockchain. ERC stands for Ethereum Request for Comment, and 20 is the number that was assigned to this request.
The ERC-20 standard defines a common list of rules that an Ethereum token has to implement, giving developers the ability to program how new tokens will function within the Ethereum ecosystem. This token standard makes it possible for developers to accurately predict how new tokens will function within the larger Ethereum system.
The rules set out in the ERC-20 standard are straightforward and easy to follow. They include how the tokens can be transferred, how transactions are approved, how users can access data about a token, and the total supply of tokens.
By ensuring compatibility between different tokens, the ERC-20 standard has greatly facilitated the growth of the Ethereum token ecosystem. Thanks to ERC-20, you can hold, trade, and manage tokens from many different projects in a single Ethereum wallet.
This standard has been fundamental in the proliferation of initial coin offerings (ICOs), as it provides a blueprint for creating new tokens to raise funds for a project.
While ERC-20 tokens are popular and widely used, it’s important to note that they are not without issues. One common problem is that if you send an ERC-20 token directly to a smart contract (which isn’t set up to receive such tokens), the tokens can be locked and lost forever. To address these and other issues, other token standards (such as ERC-223, ERC-721, ERC-1155) have been proposed and implemented.
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