The early days of digital currencies required anyone launching a blockchain project to build an entirely new blockchain from scratch—essentially reinventing the wheel. But today, thanks to Ethereum and its ERC20 token standard, anyone can create their own token without developing a new blockchain. The ERC20 standard has enabled the creation of thousands of tokens that we now use daily across decentralized applications, exchanges, and wallets.
This breakthrough has revolutionized the crypto landscape. In this article, we’ll explore what the ERC20 standard is, how it works, and why it’s so important. We’ll also answer the question: What is an ERC20 token? Let’s dive in.
Understanding the ERC20 Standard
ERC20 stands for Ethereum Request for Comment 20, where "ERC" refers to a proposal submitted by developers to improve the Ethereum ecosystem, and "20" is the unique identifier for this specific standard. It defines a set of rules and functions that every Ethereum-based token must follow.
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This standard allows developers to create fungible tokens—interchangeable digital assets—on the Ethereum blockchain using smart contracts. Instead of building a custom blockchain, creators deploy a smart contract that adheres to the ERC20 specification, making the process faster, cheaper, and more secure.
The ERC20 standard ensures interoperability across wallets, exchanges, and dApps (decentralized applications). Because all ERC20 tokens speak the same “language,” they can be easily transferred, stored, and traded without requiring custom integration for each new token.
Key Features of the ERC20 Standard
To function correctly, an ERC20 token must implement a defined set of functions and events. These are divided into mandatory and optional components.
Optional Parameters
These metadata fields help identify and describe the token:
- Token Name: A human-readable name (e.g., ArzdigitalGame)
- Symbol: A short ticker symbol (e.g., AGM)
- Decimals: Determines divisibility. For example, 18 decimals means the smallest unit is 0.000000000000000001 of a token
Mandatory Functions
These core functions ensure consistent behavior across all ERC20 tokens:
- Total Supply: The total number of tokens created
- Balance Of: Returns the token balance of a specific wallet address
- Transfer: Enables users to send tokens directly to another address
- Transfer From: Allows third-party transfers (used in exchanges or dApps)
- Approve: Grants permission for another address to spend tokens on your behalf
- Allowance: Checks how many tokens a spender is allowed to transfer from a given account
These functions create a predictable framework, allowing wallets like MetaMask or Trust Wallet to automatically detect and manage any ERC20 token without manual configuration.
What Is an ERC20 Token?
An ERC20 token is a fungible digital asset built on the Ethereum blockchain following the ERC20 technical standard. Unlike native cryptocurrencies like Bitcoin or Ether (ETH), which run on their own blockchains, ERC20 tokens exist as smart contracts on Ethereum.
Because they're compatible with the Ethereum Virtual Machine (EVM), ERC20 tokens can interact seamlessly with decentralized applications and services across the Ethereum ecosystem.
Some of the most widely used ERC20 tokens include:
- Tether (USDT) – A stablecoin pegged to the US dollar
- Wrapped Bitcoin (WBTC) – A tokenized version of Bitcoin on Ethereum
- Chainlink (LINK) – Powers oracle services for smart contracts
- Shiba Inu (SHIB) – A popular meme token with massive community support
👉 See how top ERC20 tokens are driving innovation in DeFi and Web3.
These tokens power everything from decentralized finance (DeFi) protocols to NFT marketplaces and gaming ecosystems.
Why Is the ERC20 Standard Important?
Before ERC20, every project had its own way of defining tokens—different naming conventions, transfer methods, and balance checks. This lack of standardization made integration difficult for wallets, exchanges, and developers.
ERC20 solved this problem by introducing a universal interface. Now:
- Wallets can automatically support new tokens
- Exchanges can list tokens faster
- Developers save time and reduce errors
This standardization dramatically lowered the barrier to entry for launching new projects. Instead of spending months building infrastructure, teams can focus on innovation—fueling rapid growth in DeFi, DAOs, and tokenized assets.
Additionally, it’s important to distinguish between coins and tokens:
- Coins (like ETH or BTC) have their own independent blockchain
- Tokens (like USDT or LINK) are built on top of existing blockchains
ERC20 tokens fall into the latter category—they rely on Ethereum’s security and network effects while enabling customized utility within specific applications.
Alternatives to the ERC20 Standard
While ERC20 dominates the Ethereum ecosystem, other blockchains offer similar token standards:
- BEP20: Used on Binance Smart Chain (now BNB Chain), offering lower fees and faster transactions
- TRC20: The token standard on the Tron network
- Solana SPL: Token standard for Solana-based assets
- Cardano Native Assets: Built directly into Cardano’s ledger without requiring smart contracts
Each alternative aims to improve scalability, cost-efficiency, or speed while maintaining compatibility with their respective ecosystems.
ERC20 vs TRC20: A Comparative Overview
As two widely used token standards, comparing ERC20 and TRC20 highlights key differences in performance and usability.
Transaction Speed
- TRC20: Transactions finalize in about 3 seconds
- ERC20: Typically takes 15+ seconds due to Ethereum’s consensus mechanism
Transaction Fees
- TRC20: Extremely low fees (often under $0.1)
- ERC20: Fees vary based on network congestion; can spike during peak times
Wallet Address Format
- ERC20: Addresses start with
0x - TRC20: Addresses start with
T
Security
Both networks are well-established and secure. While Ethereum has a longer track record and larger validator set, Tron also demonstrates strong resilience against attacks. The difference in security is minimal for most users.
USDT: ERC20 vs TRC20
Tether (USDT), the world’s largest stablecoin, exists on multiple blockchains—including both Ethereum (as ERC20) and Tron (as TRC20).
While both versions maintain a 1:1 peg to the US dollar, there are practical differences:
- USDT (ERC20): Higher transaction fees but benefits from Ethereum’s robust security and wide adoption
- USDT (TRC20): Faster and cheaper transactions; preferred for high-frequency trading or remittances
⚠️ Important: Always confirm which network you’re using when sending USDT. Sending ERC20 USDT to a TRC20 address (or vice versa) will result in permanent loss of funds.
Frequently Asked Questions (FAQ)
How long does an ERC20 transaction take?
On average, an ERC20 transaction takes between 15 seconds to several minutes depending on network congestion. It usually requires 12 confirmations for finality.
What is the cost of an ERC20 transaction?
Fees depend on Ethereum’s gas price, which fluctuates based on demand. During low traffic, fees can be under $1; during spikes, they may exceed $50.
Can anyone create an ERC20 token?
Yes—anyone with basic knowledge of Solidity (Ethereum’s programming language) can deploy an ERC20 token. However, giving it real-world value requires a compelling use case and community trust.
Do I need ETH to use ERC20 tokens?
Yes. You need Ether (ETH) to pay gas fees for transferring or interacting with any ERC20 token on the Ethereum network.
Are all tokens on Ethereum ERC20?
No. While ERC20 is common for fungible tokens, others like ERC721 (for NFTs) and ERC1155 (multi-token standard) serve different purposes.
👉 Start exploring top ERC20 tokens and their real-world applications today.
Final Thoughts
The ERC20 standard has been a game-changer in the world of blockchain technology. By providing a simple, reliable framework for creating tokens on Ethereum, it has empowered thousands of developers to launch innovative projects without reinventing foundational infrastructure.
Despite emerging competitors like BEP20 and TRC20 offering faster speeds and lower costs, ERC20 remains the most trusted and widely adopted token standard, backed by Ethereum’s unparalleled security, decentralization, and ecosystem maturity.
Whether you're investing in stablecoins like USDT, participating in DeFi protocols, or collecting utility tokens, chances are you’re already using ERC20 tokens. Understanding how they work gives you a stronger foundation for navigating the evolving digital economy.
As blockchain adoption grows, standards like ERC20 will continue to play a crucial role in shaping interoperable, scalable, and user-friendly financial systems.
Core Keywords:
ERC20, Ethereum, token standard, smart contract, fungible token, USDT, blockchain, DeFi