What is ERC-20 Token Standard? List of ERC20 Tokens

KEY TAKEAWAYS

What is ERC20? ERC-20 tokens are a type of digital token capable of substituting; they often exist on the Ethereum blockchain. This technical standard plays a crucial role in developing smart contracts on the blockchain, enabling developers to create and deploy tokens on Ethereum.

The ERC-20 standard offers many advantages in terms of flexibility in liquidity.

• The standard comprises rules that developers must strictly adhere to, ensuring the compatibility of the tokens created and operated.
• This aids users and developers in easily engaging with services, applications, or protocols on the Ethereum network.
• Each ERC-20 token has a specific purpose within the ecosystem and can be exchanged on the Ethereum network.
• Establishing this standard has facilitated favorable conditions for interaction between tokens and applications.

1. WHAT IS ERC-20 TOKEN STANDARD?

In the Ethereum system, ERC stands for "Ethereum Request for Comments." These are technical documents outlining standards for programming on Ethereum. Unlike EIPs (Ethereum Improvement Proposals), which focus on protocol enhancements, ERCs concentrate on establishing conventions to facilitate easier interaction between applications and contracts, similar to Bitcoin's BIPs.

ERC-20, proposed by Vitalik Buterin and Fabian Vogelsteller in 2015, defines a simple format for tokens operating on Ethereum. Adhering to this standard saves developers time and effort, as they don't need to invent new structures. Instead, they can build on an established platform within the industry.

When new ERC-20 tokens are created, they automatically become compatible with services and software supporting the ERC-20 standard, such as various wallet types, exchanges, and more.

It's important to note that the ERC-20 standard evolved into an EIP (specifically, EIP-20) after a few years of widespread adoption. Despite this evolution, the term "ERC-20" continues to be widely used even after some time has passed.

2. FUNCTIONS OF ERC20 

In the Ethereum structure, ERC stands for "Ethereum Request for Comments," which refers to technical documents proposing programming standards for Ethereum. ERC focuses on establishing conventions for easier interaction between applications and contracts, unlike EIPs (Ethereum Improvement Proposals) which concentrate on protocol improvements, similar to Bitcoin's BIPs.

It's important to note that the ERC-20 standard evolved into an EIP (specifically EIP-20) after being widely adopted. Despite the passage of time, the name "ERC-20" remains commonly used.

The ERC-20 token is implemented according to various different standards - Source: Bitpanda

By using the outlined rules, users can develop an ERC20 Token, enabling querying of the token's supply, balance checks, fund transfers, and decentralization for managing their tokens in decentralized applications.

Flexibility is a major attraction of the ERC20 Token, with established conventions that don't limit token development. This allows parties to implement additional features, customize parameters according to specific needs, and cater to particular requirements.

3. PROS AND CONS OF ERC-20

Every token on the market has its pros and cons. What are ERC-20 token's pros and cons? Depending on those, one can choose a product that suits oneself.

3.1. Advantages of ERC20 Tokens:

• Fungibility: Each ERC20 token on the network is interchangeable with another. This means each unit is usable and holds an equivalent value. Holding 1 USDC, regardless of the specific token you hold, allows you to transact and exchange while maintaining the same properties. Similar to going to a market where paying 10,000 VND is interchangeable with any type of 10,000 VND.
• Flexibility: ERC20 tokens are adaptable and adjustable to serve various purposes and different applications. They can function as currency in Automated Market Maker (AMM) transactions or be invested to earn interest on lending platforms.
• Popularity: ERC20 tokens are widespread within the crypto community, making it a compelling reason to use them as a common standard. Many exchanges, wallets, and smart contracts are compatible with ERC20. Additionally, support from developers and documentation is abundant.

ERC-20 has many advantages, especially its flexibility - Source: Doubloin

3.2. Disadvantages of ERC20 Tokens

• Scalability: Similar to many other blockchain networks, scalability is a significant challenge for Ethereum. Currently, scaling Ethereum encounters difficulties, leading to high transaction fees and slow speeds during peak times. This affects the usability of ERC20 Tokens.
• Scam Risks: While not a technological flaw, the ease of creating new tokens can be considered a drawback of ERC20 in certain aspects. Presently, creating an ERC20 Token is quite straightforward, allowing anyone, regardless of intent, to create tokens easily.

During peak hours, the ERC-20 system can experience network congestion - Source: CoinGape

4. ERC-20 VS. BEP-20 

What is ERC 20? ERC-20 is a technical standard for smart contracts on the Ethereum blockchain to manage tokens.

Meanwhile, BEP-20 represents a token standard on Binance's smart contract blockchain.

It's worth noting that both BEP-20 and ERC-20 use the same address format. This creates confusion, such as listing ETH as an ERC-20 token. Hopefully, Binance will soon change this to avoid confusion for users.

5. LIST OF ERC-20 TOKENS

Below is a list of ERC 20 tokens:

5.1. Stablecoin

Stablecoins, tokens pegged to fiat currency, often use the ERC-20 token standard. Trading with the BUSD contract we mentioned earlier is an example. Most stablecoins we know also adopt this format.

>> Read more: What is stablecoin? Should I buy stablecoins?

For a stablecoin backed by fiat, the issuer holds reserves in euros, dollars, etc. Then, for each unit in the reserve, they mint a token. This means if $10,000 is locked in the reserve, the issuer can create 10,000 tokens, each exchangeable for 1 dollar.

Technically, this can be done quite easily on Ethereum. The issuer simply needs to deploy a contract with 10,000 tokens. They can then distribute these to users with the promise that they can later exchange the tokens for an equivalent fiat amount.

ERC-20 tokens are quite popular and widely used - Source: Token Metrics

Users can do several things with their tokens - they can purchase goods and services or use them within DApps. Additionally, they can request immediate conversion to real currency. In that case, the issuer burns the returned tokens (rendering them unusable) and withdraws the exact fiat amount from their reserves.

The contract governing this system, as mentioned earlier, is relatively simple to execute. However, launching a stablecoin entails not only this but also a lot of other work such as logistics, compliance, etc.

5.2. Security Tokens

Security tokens are similar to stablecoins. At the contract level, both appear similar as they function in the same way.

The difference lies in the issuer. Typically (though not always), these tokens represent some form of ownership in a company or commodity.

5.3. Utility Tokens

Utility tokens are perhaps the most prevalent type of token today. Unlike the previous two types, they aren't backed by any asset. If the other types are backed by assets like stocks, utility tokens are more like advertising flyers: they serve a function but have no value outside of that.

Utility tokens can serve numerous use cases; they can act as currency in games, fuel for decentralized applications, customer loyalty points, and much more.

6. ERC-20 FAQS

To make the most rapid and straightforward use of ERC-20, here are the commonly faced queries that will be addressed here.

6.1. What's the Difference Between ETH and ERC-20?

ETH or Ether is the native token on the Ethereum network, serving as the means of payment to verify transactions within the system. ERC-20 is a token standard used to create tokens based on smart contracts operating on the Ethereum network.

6.2. What is an ERC-20 Wallet?

The ERC 20 wallet is considered a reliable type of digital wallet and is trusted by many financial investors. In terms of usage, the ERC20 wallet doesn't differ from other typical digital wallets. Particularly, the ERC20 digital wallet has an extremely high-security system with rigorously established and professional network security.

ERC-20 wallets are currently being used and chosen by many people - Source: Crypto Wallets

6.3. Are ERC-20 tokens a good investment?

If you deploy an ERC 20 network that experiences congestion, the token's usability might be affected. This is nearly an issue for most tokens in the market, so you don't need to worry too much.

The Ethereum ecosystem is expanding rapidly, with over 20 different EVM chains operating vigorously. However, the multitude of diverse blockchains often leaves users confused and makes investment decisions and portfolio management challenging.

Klarda serves as an excellent tool to enhance your pro-level investment in the Ethereum ecosystem.

• Integrated with over 20 different EVM chains, it provides users with accurate price data and rapid updates.
• It offers evaluations for each token, along with assessing the positive/negative aspects of your investment portfolio through Klarda Indexes.
• Klarda also suggests high-precision trading signals and delivers in-depth, up-to-date analytical information, providing you with a comprehensive view of the market from macro to micro levels.

6.4. What are gas fees?

Gas fees refer to the amount of money or tokens users need to pay each time they execute a transaction or a smart contract operation on the blockchain.

Gas is the unit measuring the complexity of operations on the blockchain. The higher the complexity, the more gas is required, and consequently, the gas fee increases.

6.5. Is it risk to invest in ERC-20 tokens?

Sending transactions during peak times can significantly increase gas fees and result in slower processing times. This can potentially affect ERC20 Tokens if the situation persists.

Scam risks: Many experts assess that creating tokens using the ERC 20 standard is 'quite easy.' Therefore, everyone needs to be extremely cautious to ensure safety when engaging in investments.

The information above has outlined the specifics of ERC-20. It's one of the areas worth investing in for the future, but caution is paramount due to numerous unreliable addresses.