ERC20 Contract: A Complete Guide on ERC 20

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Smart contracts are nothing but simple programs stored on a blockchain. They tend to run when the predetermined conditions are met and are used for the purpose of automating the execution of an agreement so that each of the participants can be certain of the outcome almost instantaneously without the involvement of any kind of intermediaries or loss of time. At the same time, smart contracts have the ability to automate a workflow by facilitating the next action at the time when the requisite conditions are met.

What is the ERC 20 Contract?

An ERC20 contract is a token contract that keeps a track of fungible tokens that is any one of the tokens which is exactly equal to any other token. None of the other tokens have special rights or behavior associated with them. This, in turn, plays a significant role in making the ERC20 tokens quite useful for a wide range of things such as a medium of exchange currency, staking, voting rights, and a number of others. ERC 20 contract is one of the most vital smart contract standards on Ethereum. It has emerged as the technical standard that is used for all smart contracts on the Ethereum blockchain for implementations of fungible tokens.

The ERC 20 contract puts forth a set of common rules and regulations that each of the Ethereum tokens must abide by. As a result of this, the ERC 20 token standard provides power to all types of developers to make an accurate prediction about the functioning of new tokens within the larger Ethereum system. This, in turn, plays a crucial role in simplifying and easing the tasks of developers. It is because of the fact that the developers can proceed with their work since they know that each of the projects would not need to be done again each time when a new token is released, as long as the token adheres to the set rules and regulations.

Functions Implemented by ERC 20 Contract

Let us individually understand the functions implemented by ERC 20 contract.

Getters – The function getter returns the amount of tokens in existence and does not alter the state of the contract. It is to be remembered that the Solidity programming language is devoid of floats and hence most tokens adopt 18 decimals which will be returning the total supply along with other results as follows: 1000000000000000000 for 1 token. Every token does not have 18 decimals and it is precisely where the users need to be extremely careful at the time of dealing with tokens. The ERC 20 standard permits an address to give consent to another address so that it is able to retrieve tokens from it. This getter returns the number of tokens remaining that the spender is permitted to spend on behalf of the owner. As the function is a getter, it does not change the contract's state and by default should return 0.

Functions – It moves the amount of tokens from the function address of the caller to the address of the recipient. This function releases the Transfer event. It returns the actual value if the transfer was possible. It is required to set the amount that a spender is allowed to transfer from the function caller balance. This function releases the Approval event. The function returns whether the allowance was sent successfully or not. The movement of amount of tokens to the recipient from the sender is done by making use of the allowance mechanism and the amount is then deducted from the allowance of the caller.

Events – This event is released at the time when the value of the amount of tokens is sent from the sender's address to the recipient's address. At the time of minting of new tokens, the transfer is usually from the 0x00..0000 address and on the other hand, at the time of burning tokens, the transfer is to 0x00..0000. The release of the event takes place at the time when the value of the amount of tokens gets approval from the owner that is to be used by the sender.

How Does the ERC 20 Contract Work?

ERC 20 smart contracts work by following the simple “if/when…then…” type of statements that are coded on a blockchain. The actions are executed by a vast network of computers at the time when the preset conditions have been met as well as verified. These actions could include registration of a vehicle, the release of funds to the appropriate parties, issuing a ticket, or sending notifications. After the completion of the transaction, the blockchain is updated. It indicates that the transaction cannot be altered and only the parties who have the permission can view the results.

Within the contract, there can be as many stipulations as per the requirements for the purpose of satisfying the participants by the satisfactory completion of the tasks. For the purpose of establishing the terms, the participants are required to determine how transactions and their data are represented on the blockchain, agree on the “if/when...then…” regulations & rules that control those transactions, explore each of the possible exceptions, and define a framework for providing appropriate resolution for the disputes.

Benefits of ERC 20 Contract

Here are a few benefits of the ERC 20 smart contract.

  • The speed of execution is very high along with a hundred percent efficiency as well as accuracy.
  • No involvement of third parties readily enhances the level of trust and transparency among the users.
  • Records of blockchain transactions are encrypted and hence very difficult to hack, therefore security is enhanced significantly.
  • ERC 20 smart contract eliminates the need for intermediaries and hence saves a lot of the transaction fees along with saving time.


The use of smart contracts in a wide array of industries is readily increasing where businesses are on the lookout for exploring the benefits of smart contracts in active blockchain solutions. The time is not very far when we would see the use of smart contracts in almost every business be it hospitality, pharmaceuticals, or retail. So, let us wait to see what the future has in store for the applications of smart contracts.

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