What is the Erc20 Standard and How it Links to Ethereum?

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What is the Erc20 Standard and How it Links to Ethereum?

The world of cryptocurrency might seem to be quite daunting for any average investor particularly for the ones who possess very little or zero knowledge of blockchain or smart contracts. But the prospects of several new digital currencies have attracted the attention of almost all types of investors which includes the ones who have otherwise been a bit more cautious about making an investment in cryptocurrency. In order to be successful in the world of cryptocurrency, in-depth technical knowledge is not required. But a basic knowledge about some of the vital properties of the digital currencies existing at present would certainly be helpful in making a safe and sound financial decision.

What is ERC 20 Standard?

One of the vital portions that govern the space of cryptocurrency in relation to smart contracts and smart property is referred to as the ERC 20 Standard. It refers to the scripting of a standard that is used within the Ethereum blockchain. It is a technical standard that puts forth a set of rules and actions that should be necessarily followed as well as implemented by an Ethereum token or smart contract. To state it in the simplest of terms, it would be ideal to say that ERC 20 is a set of basic guidelines and functions that must be adhered to by all new tokens created in the Ethereum network.


ERC 20 is one of the most significant Ethereum tokens that has emerged as a standard for all smart contracts on the Ethereum blockchain. It is the standard token used for the purpose of creation and issuance of smart contracts on the Ethereum blockchain. Then the smart contracts can be used to create tokenized assets or smart property that can be invested in by the interested investors.

A Brief History of ERC 20 Standard

ERC 20 was developed by Ethereum developers on behalf of the broader Ethereum community in the year 2015 but it was officially recognized in September 2017. For creating a standard of this type of Ethereum, the developer should submit an Ethereum Improvement Proposal or EIP with its new functionality and its specific protocols as well as standards. Then a specialized committee reviews, approves, amends, and finalizes that proposal which then becomes an ERC. Smart contracts and different features within Ethereum are then bound to conform to one of the approved standards. ERC 20 Standard happens to be one of the most important and well-known ERC Standards but it is to be kept in mind that it is not the only one in existence.

Importance of ERC 20 Standard

ERC is the abbreviated form of Ethereum Request for Comment. Request for comment is a concept that is very similar to the one devised by the Internet Engineering Task Force as a means of transferring vital technical notes as well as requirements to a group of developers and users. The ERC 20 standard has been a commanding pathway for the development of new tokens in the world of cryptocurrency for quite some time. ERC 20 has been quite popular among crowdfunding companies and ICOs. At this point in time, there are tens of thousands of unique tokens that have been issued which operate as per the ERC 20 Standard.


There are a number of ERC 20 smart contracts that are used for the purpose of execution of a wide range of functions and routines in the digital space. On the other hand, many of the ERC 20 smart contracts are used in order to create non-fungible tokens or NFTs for the purpose of ICO or initial coin offering. ICO or initial coin offering in the world of cryptocurrency is equivalent to an IPO or initial public offering in the world of the stock market. Any of the crypto companies looking forward to raising money in order to create a new cryptocurrency, decentralized app, or service launches an initial coin offering as a way to raise funds from the investors and early adopters.


According to a report from Yahoo News, it said that ERC20 tokens entirely dominated the ICO bull market way back in the year 2017 and that a number of successful cryptocurrencies are founded as per the ERC 20 Standard. For instance, EOS is a very popular token based on ERC 20 that raised more than about 185 million dollars in its five-day ICO launch. Bancor or BNT is another popular example of a token-based on ERC 20 that earned about 153 million dollars in crowdfunds during its ERC20 token sale. There are a number of other tokens that are compliant with ERC 20 Standard that have raised several million dollars in ICOs.

Six Different Coding Functions Specified by ERC 20 Standard

There are about 442,647 ERC 20 compatible tokens that exist on the Ethereum network. The ERC 20 Standard puts forth a set of common rules which every Ethereum token must stick to. To make it easier for users to understand, here we have listed six different coding functions that every ERC 20 compliant token should be able to implement.

  1. Total Supply – It provides information regarding the total supply of tokens.
  2. Balance Of – It provides the account balance of the account of the owner.
  3. Transfer – It executes the transfers of a specific number of tokens to a specific address.
  4. Transfer From – It executes the transfers of a specific number of tokens from a specific address.
  5. Approve – It allows a spender to withdraw a fixed number of tokens from a specific account.
  6. Allowance – It returns a fixed number of tokens to the owner from a spender.

These code functions play an integral role in the implementation of tokens particularly in determining the total number of tokens in circulation storing & returning balances, making a transfer, withdrawal requests & granting approval, and agreeing to automated transfers. The set of functions makes sure that different types of Ethereum tokens will perform uniformly at every place within the Ethereum network.

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By |2021-12-16T10:08:24+05:30December 16th, 2021|Blockchain|Comments Off on What is the Erc20 Standard and How it Links to Ethereum?

About the Author:

Sonal Mehta is a Content Lead at Solulab, USA based leading Blockchain Technology, mobile apps and software development agency, started by Ex vice president of Goldman Sachs, USA and Ex iOS lead engineer of Citrix. Solulab help build startups - we are a no-sweat technical partner for early stage entrepreneurs to launch ideas from scratch and for later stage startups to build more quickly and affordably.

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