ERC-20 is an interface standard (protocol) for Ethereum-based tokens (Tokens). All tokens that comply with the ERC-20 standard can be immediately compatible with Ethereum wallets. ERC-20 was born in 2015 and was formally standardized in September 2017. The protocol specifies a set of basic interfaces for fungible tokens, including token symbols, issuance, transfer, authorization, etc. There is no value distinction in the ERC-20 standard, and tokens can be interchangeable.
To further explain, it can be compared to how the TCP/IP protocol is used to standardize Internet communication transmission. The ERC-20 protocol is one of the standards used to standardize data communication on the Ethereum platform. Therefore, if you want to issue a Token on Ethereum, you need to comply with the Ethereum ERC-20 protocol. This protocol mainly includes: determining the token’s name, abbreviation, total amount, precision to how many decimal places, and so on.
Currently, ERC-20 has become the most mainstream token standard in the Ethereum network, with over 95% of the tokens on the market developed based on this standard. This standard allows developers to issue their own tokens on Ethereum with a lower threshold and provides a set of standardized and simplified design functions, specifically:
Obviously, many computer enthusiasts who do not understand programming can also issue a new token in a short time by copying the ERC-20 standard code. This has led to the emergence of various types of crypto assets like bamboo shoots after a rain since the summer of 2017. The ERC-20 standard has become the template for Ethereum token standards, with ERC-223, ERC-621, and ERC-777 all being improved versions of ERC-20.
It should be noted that the ERC-20 standard is not compatible with NFTs, as NFTs are non-fungible tokens and do not match the homogenous design standard of the ERC-20 protocol. Therefore, the ERC-721 standard for issuing NFT assets on Ethereum emerged subsequently.
Moreover, it is important to note that ERC-20, as a standard and protocol, also provides multiple functions for crypto assets. It is also a smart contract that provides on-chain asset storage and transfer functions. In this sense, it is more like a decentralized network, providing a carrier for the flow of assets on the chain. Of course, this is also due to it being a standardized protocol, which enables it to take on such a significant role, as most assets minted according to this standard have high interoperability and compatibility, encountering fewer obstacles in seamless on-chain integration.
For ordinary users, ERC-20 is most closely related to the transfer of stablecoins like USDT. This part deserves a focused introduction:
As is well known, USDT is a medium of value and a measure of value in the crypto circle. Transactions between different types of tokens require USDT as an intermediary. However, the receipt, storage, and transfer of USDT all rely on specific decentralized networks. In the early days, USDT was mainly issued, traded, and stored on the Bitcoin Omni protocol. However, after 2018, with the explosive growth of the Ethereum ecosystem, Tether, the company behind USDT, chose to embrace Ethereum, which had a higher degree of ecosystem activity, and naturally, the first choice among many protocols was the most commonly used ERC-20 protocol.
In terms of transferring centralized stablecoin assets like USDT, the ERC-20 network has several clear advantages over the Omni protocol: although it also charges miner fees, the transfer speed is faster, the stability is stronger, and the security is more guaranteed.
With the intensifying congestion of the Ethereum network and the rise in ETH prices, the cost of transferring using the ERC-20 standard has become prohibitively high for many users. In response to this pain point, the TRON public chain network developed the TRC-20 protocol, which does not charge miner fees, to compete for market share with ERC-20. However