What is ERC20 in Crypto? Ultimate Guide to the ERC20 Network

This article will help you understand these blockchain networks, beginning with the ERC20. Subsequent editions will cover the other networks 

What is ERC20 in Crypto: A Beginner’s Definition  

ERC-20 is the token standard for sending and receiving fungible tokens on the Ethereum network. For those who may be confused, fungible tokens are digital assets that can be divided into smaller units and are typically referred to as cryptocurrencies.

While they are very popular, cryptocurrencies are not the only tokens to be minted on a blockchain. Other tokens like NFTs do not use the same token standard, especially for a network as versatile and popular as Ethereum.

Cryptocurrencies are fundamentally different from nonfungible tokens. Considering their differences, networks that support both must create distinctive channels for minting and transferring them. 

Ethereum is one of such networks to support the use of NFTs and smart contracts. Hence, the need to have multiple token standards.

Key Features of the Ethereum Token Standard 

What are the essential features of the ERC20 standard? How do these features combine to enable people to mint, store, and transfer cryptocurrencies on the Ethereum network?

Below is an explanation of these components and how they work

• Transferring tokens between addresses: The ERC20 token standard enables users to send and receive supported cryptocurrencies. Ethereum is a popular network and supports several other tokens besides ETH. Popular cryptos include USDT, LINK, UNI, DAI, MATIC, etc.
• Checking account balances: Besides sending and receiving supported tokens, the ERC20 lets people see their wallet balance. Knowing how much they have left allows people to manage their portfolios more efficiently.
• Approving token transfers by third parties: The ERC20 token standard also allows people to perform technical functions like swapping and lending. This involves enabling them to authorize transactions on third-party services like decentralized exchanges or lending platforms.

What is the Role of ERC20 in the Crypto Ecosystem?  

Without a doubt, Ethereum is one of the biggest projects in Web3. There is a reason why “What is ERC20?” is the focus of today’s article. The Ethereum network broadened decentralized technology by introducing new technological features that are still used today.

Many layer-1 blockchain projects are inspired by Ethereum and called “EVMs” – which translates to “Ethereum Virtual Machines”. Although people can build (and have built) on the Bitcoin network, it is significantly limited. Ethereum, however, offers far more possibilities.  In addition, several layer-2 projects like crypto cross-border payments are built on the Ethereum blockchain.

For example, the Ethereum network introduced smart contracts, creating whole new possibilities. This enables automatization in blockchain, further strengthening security and transparency. In addition, smart contracts created a trustless environment, whereby two strange individuals who do not know each other can rely on blockchain to serve as the middleman.

ERC20 supports every type of token, both fungible and nonfungible. Besides NFTs, this token standard enables people to store and transfer, stablecoins, governance, and utility tokens. There is a 70% chance that your favorite token is available on the ERC20 network

Advantages and Limitations of the Ethereum Token Standard  

Without any doubt, the ERC20 has significantly impacted the DeFi space. Despite its positive contributions, there are still certain drawbacks. This section will examine some positives and downsides of this blockchain

Advantages of the Ethereum Network:

• Smart Contract Capability: Ethereum allows developers to create and deploy smart contracts easily.
• Large Developer Community: It has a vast and active community, ensuring continuous improvements and support.
• Diverse Use Cases: Ethereum supports a wide range of applications, including DeFi, NFTs, and dApps.
• Established Ecosystem: As one of the oldest blockchain platforms, it has a well-developed infrastructure.
• Upgradable: With upgrades like Ethereum 2.0, it is moving toward greater scalability and energy efficiency.

Disadvantages of the Ethereum Network:

• High Transaction Fees: During peak usage, gas fees can become expensive for users.
• Slower Speeds: Compared to newer blockchains, transaction speeds can be slower due to congestion.
• Complexity: Its programming model can be difficult for beginners to understand and use.
• Competition: Faces stiff competition from faster and cheaper blockchain networks like Binance Smart Chain and Solana.

How to Create Your Own ERC20 Token

Do you know that you can mint your own fungible token on the ERC20 with the right tools? But, what is the tool/tools to mint tokens on the ERC20 tokens?

Below are some ERC20 token generation tools:

• TrustToken Token Generator
• OpenZeppelin Wizard
• Tally
• Token Wizard by ConsenSys Diligence
• MyEtherWallet (MEW)

With access to any of these tool, follow these steps to create an ERC20 token:

• Choose a Tool: Use a user-friendly platform like Tally, TrustToken Token Creator, or OpenZeppelin Wizard to create your ERC20 token without coding.
• Enter Token Details: Provide basic information such as the token name, symbol (e.g., MTK), and total supply (e.g., 1,000,000).
• Set Decimals: Decide how many decimal places your token will have (the standard is 18 for divisibility).
• Review Settings: Double-check all details to ensure accuracy before proceeding.
• Connect Wallet: Link your Ethereum wallet (e.g., MetaMask) to the platform.
• Pay Gas Fees: Approve the transaction and pay the required gas fee in ETH for deployment.
• Deploy Token: Click “Create” or “Deploy” to mint your token on the Ethereum network.
• Verify on Blockchain: Once deployed, note the contract address and verify it on an explorer like Etherscan.
• Distribute Tokens: Share the tokens with others by sending them from your wallet.

Tips for Ensuring Compliance

• Follow the ERC20 Specification and stick to the official ERC20 standard when writing your contract.
• Use tools like Remix’s built-in testing features or frameworks like Truffle to validate your contract’s functionality.
• Consider hiring a professional auditor or using automated tools to identify vulnerabilities.
• Provide clear documentation for users, including details about tokenomics, use cases, and any custom features.