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A token is a type of cryptocurrency which can be created by anyone, without the need for much technical know-how or skill. This is one of the reasons there are so many cryptocurrencies on the market - tokens have enabled almost any brand, company or idea to make their own in a matter of minutes. ERC20 is a technical standard for tokens issued on the Ethereum blockchain. For a simple explanation of exactly what that means, keep reading.
What are ERC20 tokens?
Since its launch in 2015, Ethereum has become one of the driving forces behind the growth of cryptocurrency. Initial coin offerings (ICOs) have raised billions of dollars in funding for crypto projects from all around the world, and most of these ICOs are based on the Ethereum platform. Buyers contribute Ether (ETH) or bitcoin (BTC) to participate in a crowdfunding sale, and in return receive some of the ICO project’s native tokens.
ERC20 is a technical standard for tokens issued on the Ethereum blockchain, providing a list of rules that all Ethereum-based tokens must follow. These 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. The protocol is necessary to ensure compatibility between the many different tokens issued on Ethereum.
Just like bitcoin, Litecoin and any other cryptocurrency, ERC20 tokens are blockchain-based assets that have value and can be sent and received. The difference is that instead of running on their own blockchain, these tokens are issued on the Ethereum network. This means they’re hosted by Ethereum addresses and are sent using Ethereum transactions.
Did you know?
Want to know why they’re called ERC20 tokens? The “ERC” stands for “Ethereum Request for Comments”, which is an official protocol used to propose improvements to the Ethereum network. The “20” is the unique ID number used to identify the proposal.
Popular ERC20 tokens list
Many crypto newcomers are surprised to discover just how ubiquitous ERC20 tokens are. Take a look at a list of the top 100 digital currencies by market cap and you’ll see plenty of well-known currencies that use the ERC20 standard. At the time of writing (December 2020), these include the following:
Which wallets support ERC20 tokens?
If you’re buying any digital currency that’s issued as an ERC20 token, you’ll need to find a wallet that’s compatible with these types of tokens. Happily, because ERC20 tokens are so popular, there are plenty of wallets to choose from, including the following:
Disclosure: At the the time of writing, the author holds ADA, IOTA and XLM.
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