Compared to USDT, USDC has a lower market capitalization but is considered safer by many users as its company conducts business more transparently. This problem was recognized by an Ethereum developer, Fabian Vogelsteller, so he proposed the Ethereum Request for Comment 20, or ERC-20, in late 2015. His reasoning was that every new token should feature a basic set of functions that would make it compatible with the rest of the network.
Understanding ERC-20 Token Standard
It is one of the most widely adopted protocols in the crypto community for creating smart contracts on the Ethereum blockchain network if not even the most popular token protocol. Technology is always improving, and that’s going to affect token standards too. We might see new types of smart contracts that can do more complex things, or new ways to store and manage tokens that are more efficient and secure. For example, advancements in zero-knowledge proofs could allow for more private transactions, while improvements in layer-2 scaling solutions could make transactions faster and cheaper. It’s widely supported, so it’s easy to find wallets, exchanges, and applications that work with ERC-20 tokens. It’s also relatively simple to implement, which makes it a good choice for new projects.
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Amilcar has 10 years of FinTech, blockchain, and crypto startup experience and advises financial institutions, governments, regulators, and startups. Another excellent implementation of the ERC-20 token standard is the OpenZeppelin ERC-20 implementation(opens in a new tab). ERC-20 is not only an important part of the Ethereum ecosystem, but a gateway into the broader blockchain space.
- Set the amount of allowance the spender is allowed to transfer from the function caller (msg.sender) balance.
- The ERC20 standard is the foundation of each fully operational ERC20 contract.
- Binance Coin is one of the world’s largest utility tokens by market capitalization.
- Several emerging token standards aim to improve upon existing models or address specific needs that aren’t fully met by the current ERC standards.
- While we cover a range of products, our comparison may not include every product or provider in the market.
Called Ethereum Request for Comment (ERC) 20, the standard guides token creation so that tokens compatible with the Ethereum blockchain are interchangeable. One such ecosystem and blockchain belongs to Binance, the cryptocurrency exchange. The team behind Binance created its own blockchain, the Binance Chain, from an Ethereum fork. Chainlink aims to connect the real world with blockchain through Decentralized Oracle Networks (DONs).
It is a standard for creating interoperable tokens on the Ethereum Virtual Machine. If a Smart Contract implements the following methods and events it can be called an ERC-20 Token Contract and, once deployed, itwill be https://ai-robert.com/ responsible to keep track of the created tokens on Ethereum. Set the amount of allowance the spender is allowed to transfer from the function caller (msg.sender) balance. That allows them to be stored on the blockchain and thus protected from tampering. USD Coin is a fully collateralized stablecoin issued by a company called Circle. Like USDT, USDC is also pegged to the US dollar, which means the price of this ERC-20 token should remain at $1 at all times.
Other fungible token standards
These validations also verify the validity of the recipient’s address while safeguarding against potential overflow or underflow conditions to prevent unintended consequences. This architecture ensures that ERC-20 tokens exhibit consistent behavior and interact seamlessly with other Ethereum-based applications and services. These functions facilitate token transfers between Ethereum addresses, balance inquiries, and approval mechanisms for delegated token transfers.
In other words, ERC-20 is what ensures that users can buy, swap, and HODL the many cryptocurrencies built on this standard. Without this framework, developers would create tokens using unique codebases and toolkits that could not interact with one another or protocols in predictable ways. With more than 1,000 tokens in circulation, the use cases for ERC-20 continue to expand. ERC-20 tokens represent a large variety of assets, both digital and physical. There are ERC-20 tokens that represent real estate, art, stocks, unused hard drive space, and more.
They’re also used for things like loyalty points, in-game currencies, and even representing real-world assets. Basically, if you need a digital asset that can be easily traded and used in applications, ERC-20 is a good choice. One of the key drivers behind ERC-20’s widespread adoption was its simplicity and versatility. The standard’s straightforward implementation allowed developers to create and deploy tokens relatively quickly, while its flexibility accommodated a wide range of use cases and functionalities. ERC-20 tokens could represent anything from utility tokens powering DApps to asset-backed tokens representing physical or digital assets.