๐ฆ ERC-20 ERC-20
ERC-20 is the shared rulebook for making fungible tokens on Ethereum. Because every token follows the same rules, any wallet, exchange, or app can handle a brand-new token with no extra work.
๐ The simple version โ a standard plug for tokens
Think of ERC-20 like a USB plug or a standard shipping-container size. The container can hold almost anything (a stablecoin, a reward point, a governance token), but because the shape is standardized, every truck and port can move it without special equipment. ERC-20 does the same job for tokens: it sets a small list of functions every token must have, so any wallet or app knows how to read a balance and send the token without custom code.
๐งฑ What the standard actually requires
An ERC-20 token lives inside a smart contract, not in your account directly. That contract keeps a ledger of who owns how much and updates it whenever someone sends tokens. The standard says every such contract must expose the same basic actions:
| Function | What it answers |
|---|---|
| ๐ Total supply | How many of this token exist in all |
| ๐ Balance of | How many a given address holds |
| ๐ค Transfer | Move tokens from you to someone else |
| โ Approve / allowance | Let an app spend a set amount on your behalf |
๐ Because the function names are always the same, a developer can launch a token and it instantly works with MetaMask, Uniswap, exchanges, and block explorers, with zero changes on their end.
๐ช "Fungible" โ why that word matters
Fungible means every unit is identical and interchangeable, like dollar bills: one is exactly as good as any other. That is the whole point of ERC-20. It is the opposite of an NFT, where each token is unique. The NFT standard, ERC-721, exists for those one-of-a-kind items; ERC-1155 can hold both fungible and unique tokens in one contract.
๐ Where the name comes from
"ERC" stands for Ethereum Request for Comments, and "20" is just the proposal's ID number. It was proposed by developer Fabian Vogelsteller in November 2015 and later formalized as EIP-20, but the catchier name "ERC-20" stuck. Tokens made this way are not mined like Bitcoin; the contract mints them, often all at once when it is first deployed.
๐จ Things beginners should know
- โฝ You still need ETH โ Every transfer costs gas, paid in ETH, even when you send a token
- ๐ท๏ธ Tokens, not coins โ ERC-20s run on top of Ethereum; ETH is the only native coin here
- ๐ Approvals can linger โ An old "approve" can let an app keep spending your tokens, so review them
- โ ๏ธ Anyone can launch one โ A token following the standard is not automatically safe or valuable; the rulebook says nothing about trustworthiness
โ FAQ
- Are ERC-20 tokens the same as coins?
- No. ETH is Ethereum's native coin. ERC-20 tokens are not their own blockchain; they live inside a smart contract that runs on top of Ethereum. People often call them coins out of habit, but technically they are tokens.
- Why do I need ETH to send a token like USDC?
- Every ERC-20 transfer is still an Ethereum transaction, and Ethereum transactions are paid for in ETH. The token never pays its own fee, so you must hold a little ETH for gas even when you are only moving USDC or DAI.
- What is the difference between ERC-20 and ERC-721?
- ERC-20 is for fungible tokens, where every unit is identical and interchangeable, like dollar bills. ERC-721 is for non-fungible tokens (NFTs), where each token is unique and indivisible, like a numbered collectible.