What Are ERC20 Tokens?

/What Are ERC20 Tokens?

What Are ERC20 Tokens? 2018-06-27T09:16:04+00:00
What Are ERC20 Tokens?

Quick inner navigation:

  1. What Is ERC20?
  2. What does an ERC20 do?
  4. ERC20 AND ICOs
  5. ERC20 wallets
  6. Who can build ERC20 tokens?


What Is ERC20?

One of the most popular digital currencies today, Ethereum, makes use of tokens as their basis for trading, buying and selling. There are numerous varieties of tokes that can be used with Ethereum, and each token differs from the blockchain’s currency, which is Ether. In a case like this, tokens can embody digital assets that comes with a range of values. These resources are very diverse such as vouchers and even stuff outside the world of internet. Using tokens to perform specific actions in DAPPS’ smart contract, you’re making the process seamless and simpler. Furthermore, tokens are great for Ether’s overall value as well.

The ERC20 standard protocol is seen as one of the most vital innovations when creating tokens that are based on Ethereum. ERC20 or the Ethereum token standard is used for the cryptocurrency’s smart contracts. It is neither a code nor a software or even a technology, it’s basically a technical spec wherein if tokens implement the spec, they are ERC20 tokens.

In the simplest of terms, an ERC20 token is a cryptocurrency built on top of Ethereum blockchain, the platform of smart contracts that Ether powers and currently ranked as the second biggest digital currency in terms of market cap. Its protocol standard comprises of standard functions that should be implemented by all useful tokens to be able to trade. These include the following:

  • Transferring the tokens.
  • Inquiring about a token’s balance at a specific address.
  • The token’s total supply.

On the surface, the introduction of the ERC20 token standard will not have a significant change but it offers a fascinating development. Tokens are still being issued and exchanged to other cryptocurrencies on Ethereum’s network. But assets can be easily interchanged and are guaranteed to work with DAPPS that are observing the same standard.

What does an ERC20 do?

To be able to understand what it does, it is necessary to recognize Ethereum as an engendering programmable currency. So since an ERC 20 tokens are created atop Ethereum, these tokens are programmable and the potential of their customization is limited to the imaginations of its designers or developers.

The use of the ERC20 token is noteworthy and diverse as it can facilitate the following:

  • A voting system which is based on this technology.
  • Collateral deals.
  • Tokenized assets such as silver and gold.
  • Securities dividends.
  • Staking platforms.
  • Decentralized apps’ native currencies.

Now, this is just a short list of the possibilities. Hence, there are about 5,000 ERC 20 tokens currently in existence and for a good reason. Their uses are seemingly interminable.

Who can build ERC20 tokens?

Just about anyone can build ERC 20 tokens from teams who are focusing on groundbreaking developments to scammers who are out to do a Confido, the latest digital currency scam existing online. The reason for this is because both the ERC20 token standard and Ethereum are open source, so anyone can use it for free. Nonetheless, that’s just with regards to accessibility, in that everyone has access to the required resources and tools to create tokens.

However, having the right technical skills and capabilities to essentially program these tokens is a totally different subject. To be able to program a token, you are required to have Etehereum smart contract technical capability as well as with Solidity, the blockchain system’s programming language. Bottom line is, only very few individuals across the world can code and interact with the ERC 20 token standard. This is because Solidity is comparatively unknown and cryptocurrency, in general, is simply too young.

Nevertheless, learning Solidity is possible, and a handful of programmers who are comfortable with its language are already starting to grow slowly and will continue to grow in the future.

Why is ERC20 empowering developers?

Since ERC20 outlines a list of rules that are common for every Ethereum tokens to follow, it only means that this specific token can, in fact, empower all developers to precisely predict how a new token will be able to function within the greater network of Ethereum. This ERC 20’s impact on developers is immense, as each time new tokens are released, there’s no need for projects to be redone. Instead, these tokens are intended to match any new token as long as a token follow the rules.


Today, the majority of Initial Coin Offerings or ICOs, which are generally crowd sales, are based on Ethereum’s ERC20 token standard. Before the existence of ERC20, each ICO token executed as a smart contract of Ethereum implemented their very own forms of basic functions like transferring tokens in order to re-invent the wheel. Their own version of transferring tokens would have its own distinct name and sometimes even different arguments. So if a certain developer wants to allow trading between two tokens, then he will be required to learn the details of each contract to enable trading. If there are 20 tokens and each of them implements a different method of transferring, then in order to realize a simple token exchange that can carry out all the contracts of each token would need a massive amount of difficulty.

All tokens complying with ERC20 comes with the same functionalities and names taking the same arguments. An individual can make a system for token exchange that lets him to easily add a new token to his platform the instant it is released just as long it follows the ERC 20 token standard. It doesn’t matter if there are 20 different tokes, the token exchange system will be able to support every token.

Thus, there will be less risk, the liquidity of tokes are enhanced, complexity is lessened and there will be more uniformity. Any ICOs that are successful can set up their ERC20 trading on exchanges not having the need to have a communication between him and the developers of the exchange system. An optimistic response was encouraged because of the ERC20 as the people purchasing the tokens are ensured that new ICO tokens can be traded which then leads to purchasing more ICO tokens. This results in the creation of more ICO tokens as well as eventually paving the way to more innovations and greater value in Ethereum.



The EOS token is a project headed by Dan Larimer. It is an infrastructure for decentralizing apps and an open-source platform. The tokens come with limited usage and are a native crypt for its platform. With the use of technology of horizontal and vertical scaling, it is anticipated to scale millions of transactions per second. Furthermore, EOS will also have its very own blockchain.


Also known as Tronix is a blockchain startup based in China. It’s a protocol for the digital entertainment industry across the globe. It offers developers with the setup for the development of smart networks and apps. Basically, it aims to develop a global entertainment system with free contents on the blockchain which allows users to own media, store and publish media in a decentralized way.

StatusStatus >>

Status Network is an open-source mobile browser and messaging platform designed to interact with decentralized apps within the Ethereum network. It offers a convenient way to safely store your Ether and other crypto assets as well as access the entire Etherium world just about anywhere. In addition, you can securely make payments, browse and even chat on the decentralized web.

ERC20 wallets

MyEther WalletMyEtherWallet >>

This open-source Ethereum wallet uses javascript and features a side tool for clients that can generate Ethereum wallets and send transactions. It offers users the ability to create new wallets where they can store their Ether and not on exchanges. The entire process is done on the user’s computer and not on servers so when they generate new wallets, they are solely responsible for backing them up.

However, generating wallets are more complex as well as using them compared to other ERC20 wallets out there but it is a more flexible platform. Also, using the wallet will depend on where a user will store their private keys. If they opt to store them on their hard disk, then they can only access their funds via that computer.

One of the things that users love about MyEtherWallet is they can set its security on their own individual needs. And since it’s a customer-side wallet, users are the only ones who have access to their private keys and no one at the company can ever hold them.

MistMist >>

Mist wallet was developed by the same individuals who developed Etherium’s eco-system making it the blockchain’s official wallet client. So when it comes to security, choosing it makes plenty of sense. Unlike some wallets, Mist is designed for users to have total control of their funds anytime. It also supports two various types of wallet solutions and comes with a very good user interface making it easy and simple to use. Since it’s a desktop client, it has to be manually downloaded into the user’s computer.

Though there are users complaining to have lost money whilst using this app, this is mainly because their Mist client is not immediately syncing with the blockchain. Keep in mind that in order to see the transactions on the client, the blockchain needs to be properly downloaded, so this is not considered as losing funds. Issues like these are normally resolved very fast once the downloading process has been completed.

This Ethereum wallet is the best options for both experienced and beginners to Ethereum. Its initial syncing may take a while, but it’s also the same with first-time use of a Bitcoin wallet. Mist is a convenient and powerful Ethereum wallet that is worth putting on the top of your list. But keep in mind though that you need ample storage space on your computer in order to accommodate the whole blockchain.

Metamask LogoMetaMask >>

MetaMask lets users directly run Ethereum dapps on their browsers without the need for a full node run. Aside from being a wallet, users have an options to also interact with smart contracts and dapps. It’s a browser extension that unfortunately only available to Chrome or Brava browsers at the moment, but according to its developers, they are already planning on providing Firefox support and all other browsers soon.

All MetaMask user information is encrypted and locally stored on their browsers, so they don’t have to worry about any information ever touching the servers of MetaMask. They also have complete control over managing their private keys. However, as it is web-based, this wallet is not without risks compared to hardware wallets. But as long as users follow safety protocols, their funds will not be vulnerable to viruses.

ImTokenImToken – Android and iPhone

Most mobile wallets seem not to go well with ICO tokens that Ethereum-based. But ImToken is the exception. This wallet that was released just recently can be used by both iOS and Android users and offers all functionalities of a hardware or browser wallets. It’s a simple, safe and yet powerful wallet that supports dapps, address book, multi-tokens, HDwallet and pushes notifications for transactions.

Furthermore, it features securely storing private keys locally, supports various digital wallet types so users can easily create, import and export, as well as mnemonic backup to prevent any losses. But before downloading a mobile wallet, it is important always do your research first.

ParityParity >>

Parity wallet is another top solution and is both a wallet and a browser. It serves as an interface between a user’s computer and the Ethereum network just like the MyEtherWallet. It is compatible with Mac and other computers with an OSX and Ubuntu operating systems. Parity offers impressive advanced features and comes with a high level of privacy, anonymity, and security. In addition, it also features an easy to recover sheet with a simple read of the QR code that can be scanned with almost all phone mobiles. This will let users recover their account quickly in the even their computer crashes.

Parity is the best solution for users who are trying to produce the latest generation of e-commerce solutions. If you’re someone who runs a website or owns a business that wants to add Ethereum, then Parity is the perfect way to do it. This wallet is not the best solution for private persons though, it’s more suitable for professionals as it offers more of a business solution and needs some technical level of knowledge to implement.

In a Nutshell

ERC20 is technically still being developed and improved and still not the perfect solution. But it seems as though it’s creating a strong and steady momentum that may result for all new tokens to adapt the ERC20 token standard. Since it’s still young, some troubleshooting must occur as Ethereum is continuously improving.

We hope you find this article helpful and useful. For more guides, tips, and information on Bitcoin and all other cryptocurrencies, make sure to keep coming back to our page!

Leave A Comment2 Comments on "What Are ERC20 Tokens?"

  1. CoinPayments
    CoinPayments June 5, 2018 at 8:02 pm

    Thanks for the well written and comprehensive post Mark! Just wanted to chime to to let you know that not only does CoinPayments support ERC20 tokens through a hosted wallet, we also just released our ERC20 token payment processing solution. Check out the full details here: https://blog.coinpayments.net/announcements/erc20-token-payment-processing-powered-by-coinpayments

    • Mark Schwarz
      Mark Schwarz June 6, 2018 at 11:30 am

      Thanks, I’ll be sure to check that out and update the review.

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