ERC-20

ERC-20 is a technical standard used for creating and issuing smart contracts on the Ethereum blockchain, specifically for token implementation. This standard outlines a common set of rules that all Ethereum tokens must follow, enabling seamless interaction and interoperability between different tokens and decentralized applications (dApps).

What is ERC-20?

ERC-20 tokens are fungible tokens, meaning they are interchangeable and have the same value. This standard has become the foundation for a vast majority of tokens in the Ethereum ecosystem, facilitating token creation for various purposes, including utility tokens, governance tokens, and stablecoins.

How Does ERC-20 Work?

The ERC-20 standard includes six mandatory functions and three optional functions that developers must implement in their smart contracts:

  1. Mandatory Functions:

    • totalSupply: Returns the total supply of the token.

    • balanceOf: Returns the balance of a specific address.

    • transfer: Allows the transfer of tokens to another address.

    • transferFrom: Facilitates token transfers from one address to another via an allowance.

    • approve: Allows an address to spend a specified amount of tokens on behalf of the token holder.

    • allowance: Returns the remaining number of tokens that a spender is allowed to spend.

  2. Optional Functions:

    • name: Returns the name of the token.

    • symbol: Returns the token’s symbol (e.g., ETH for Ethereum).

    • decimals: Returns the number of decimal places the token can be divided into.

Why is ERC-20 Important?

The ERC-20 standard offers numerous benefits:

  • Interoperability: Tokens adhering to the ERC-20 standard can easily interact with various wallets, exchanges, and dApps within the Ethereum ecosystem.

  • Simplicity: The standardization simplifies the token creation process, enabling developers to focus on their project rather than building custom token protocols.

  • Ecosystem Growth: The widespread adoption of ERC-20 has contributed to the growth of the Ethereum ecosystem, facilitating fundraising through Initial Coin Offerings (ICOs) and enabling the development of diverse decentralized applications.

In summary, ERC-20 is a foundational standard that has revolutionized token creation on the Ethereum blockchain, promoting interoperability and driving the expansion of the decentralized finance landscape.

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