What is an ERC-20 token?

ERC-20 tokens are a form of token on the Ethereum platform. The standard makes it possible to create uniform tokens.

What are tokens on the Ethereum Blockchain?

The Smart Contracts, as an essential element of the Ethereum Blockchain, make it possible, among other things, to create tokens. Roughly speaking, smart contracts are so-called “if-then” rules that determine what activity is executed when a particular event occurs.

Smart contracts also make it possible to create tokens. These are ultimately nothing more than smart contracts. These smart contracts, for example, determine how to transfer the tokens and ensure that the credits of each user (address) are saved.

As a trivial example of a smart contract that implements a token, the transfer of tokens can be seen. This determines that a transfer first checks whether the credit of the sending user is sufficient to carry out the transaction (transfer amount <credits). If this condition is met, the activity that updates the credits will be executed:

  • Increase the balance of A by the amount X
  • Reduce the balance of B by the amount X

    More specifically, the token transfer function is:

    function transfer (address _to, uint256 _value) returns (bool success)

    So a token is nothing more than a smart contract that implements functions like these.

What does ERC-20 mean?

The most well-known form of tokens on the Ethereum Blockchain are the so-called ERC-20 tokens. ERC-20 is an official Ethereum standard published by Fabian Vogelsteller and Vitalik Buterin at the end of 2015.The standard specifies an API that allows developers to issue their own standardized tokens. Certain methods of smart contracts are thus fixed. This also allows third-party vendors to more accurately read the information and perform transactions, since the same set of program functions is used for each ERC-20 token. A third-party app can thus be programmed generically for each ERC-20 token without knowing the specific token.The official specification of the standard can be found in the corresponding Github archive.

Examples of ERC-20 tokens

ERC-20 tokens are particularly interesting for ICOs. The following projects have issued their tokens in ERC-20 format:

  • Qtum
  • Omisego
  • Golem
  • Chronobank (TIME)
  • Humaniq