ERC-20 stands for Ethereum Request for Comment 20 and refers to a technical standard used for smart contracts on the Ethereum blockchainA blockchain is a decentralized and distributed digital ledger used to record transactions across multiple computers in a way that ensures the data can only be modified once it has been recorded. Once a block of data is recorded on the blockchain, it becomes extremely difficult to change it without altering all subsequent blocks, which requires consensus from the majority... More for implementing tokens. It is the most common standard for creating and issuing tokens on the Ethereum network.

Key Features:

1. Standardized Functions: ERC-20 defines a set of standard functions that a tokenA token is a digital or virtual representation of an asset or utility that resides on a blockchain. Tokens can represent anything from a unit of value (like a coin) to a set of functionalities and can be used for a variety of purposes such as payments, access rights, or as a means of exchange in decentralized applications. Key Points:... More contract on Ethereum must implement. These include methods related to token transfers, obtaining token balances, and getting information about the token.
2. Interoperability: Due to its standardized set of functions, ERC-20 tokens can be easily integrated into various Ethereum wallets, exchanges, and dApps.
3. Fixed Supply: Most ERC-20 tokens have a fixed supply, meaning there’s a maximum number of tokens that can ever exist.

Standard Functions:

• totalSupply(): Returns the total supply of the token.
• balanceOf(address _owner): Returns the token balance of a specific address.
• transfer(address _to, uint256 _value): Transfers a number of tokens directly from the message sender to another address.
• transferFrom(address _from, address _to, uint256 _value): Transfers tokens from one address to another, typically used to allow smart contracts to transfer tokens on one’s behalf.
• approve(address _spender, uint256 _value): Approves another address to spend a certain amount of tokens.
• allowance(address _owner, address _spender): Returns the amount of tokens approved by one address for another to spend.

Benefits:

• Uniformity: ERC-20 provides a consistent interface that allows developers to interact with tokens in a standardized way.
• Adoption: Due to its standardization, ERC-20 has been widely adopted by developers, leading to a proliferation of tokens on the Ethereum network.
• Compatibility: ERC-20 tokens can be easily exchanged, used as collateral, or integrated into decentralized applications.

Challenges:

• Lack of Customization: While the standardization of ERC-20 is its strength, it can also be a limitation for projects that need more customized token functionalities.
• Lost Tokens: If an ERC-20 token is sent to a smart contractA smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. It is a protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract, without the need for intermediaries. Key Points: • Decentralization: • Smart contracts are stored on blockchain platforms, ensuring... More that is not designed to handle it, the token can be irretrievably lost.

Examples:

Many of the top tokens by market capitalization, such as Chainlink (LINK), USD Coin (USDC), and Binance USD (BUSD), started as or are ERC-20 tokens.