We all hear about ERC-20 tokens but what are those tokens and most importantly what are they not to start with? Let’s quickly go over some of the basics. ERC stands for “Ethereum request for comments” while number 20 is the unique proposal ID number that comes from the EIP where it is described.
Back in the day, every new cryptocurrency needed to have its own blockchain. Ethereum was the first project that started acting as a development platform. On the Ethereum blockchain, there are a number of ERC20-compliant tokens, each with its own implementation. ERC-20 tokens can be exchanged and used to represent numerous types of digital assets including coins, vouchers, gold certificates, loyalty points, and IOUs, depending on the approach taken.
The technical standard is already being used by a number of applications, and the number of ERC-20 token contracts has exploded in recent years. In mid-2017, the Ethereum blockchain had roughly 5,500 ERC-20 smart contracts. This number climbed to over 40,000 in early 2018 and is currently over 490,000.
What is ERC-20?
ERC-20 is a technical standard, guideline, or specification for issuing and implementing tokens on the Ethereum blockchain, not a piece of software or code. The ERC-20 smart contract standard, which uses smart contracts for fungible token implementations, is one of the most important smart contract standards on Ethereum system.
The ERC-20 standard allows all sorts of developers to precisely determine how new tokens will interact with the Ethereum system. Developers’ duties are simplified and made easier since they may continue working knowing that each new project will not need to be rewritten every time a new token is released, as long as the token respects the rules.
ERC-20 tokens are digital assets that may be generated by anybody, but are most commonly created by organizations and IT firms. Each token has a distinct purpose, such as allowing users to vote on issues that impact the project’s future or rewarding consumers for completing specified tasks. ERC-20 tokens are usually offered as part of a variety of offers to raise early-stage cash for the underlying project.
ERC-20 standardizes each token’s essential functionality, ensuring that any tokens generated with this framework are compatible and can be exchanged with one another.
How are ERC-20 tokens created?
Firstly, smart contracts are deployed to create ERC-20 tokens and are also used to facilitate transactions of tokens and record balances of tokens in an account. After a token has been minted, it can be exchanged, spent or given to someone else. ERC-20, as earlier discussed, is the universal standard that all tokens on the Ethereum network use. It allows one token to be traded with another.
How do ERC-20 tokens work?
ERC-20 tokens are smart contracts that run on the Ethereum system. They operate within a programmatic structure established by the Ethereum team. This structure is broad enough to allow different uses without interrupting the operation of the Ethereum blockchain. For example, they can maintain a subaccount parallel to the main Ethereum ledger, having their unit of account. All of this, without mixing the Ether balances of the addresses.
It is precisely this enormous flexibility that has led ERC-20 tokens to become a standard. The main utility of these tokens is to standardize the interface to create and issue new tokens on the network. This is done by applying certain rules and parameters for acceptance. For example, to change or move an ERC-20 token, you must have Ether.
The development of ERC-20 tokens is to design a standard, create interoperability and compatibility between tokens, and promote improvements to the Ethereum ecosystem. This is because ERC-20 tokens make it much easier to create new tokens. Since the infrastructure was designed for that. It was also accompanied by tools for this purpose, such as the Solitude programming language, or the EVM virtual machine.
How to Store ERC-20 Tokens?
To exchange ERC-20 tokens on the Ethereum blockchain is easy but, it is clear that both the exchange address and ERC-20 token address are unique. Hence, sending the ERC-20 token to a personal wallet’s address and exchange’s Ethereum address is different.
All you need is to clearly identify the wallet or the exchange address you intend to send your tokens to. Otherwise, the tokens in the transactions will not be successful and the ERC-20 token may not be credited by an exchange.
Crypto exchanges for trading ERC-20 tokens
ERC-20 tokens may be sent and received using any wallet that accepts Ethereum-based assets. A gas fee is required for all ERC-20 transactions in order to pay the miner. As a result, the quantity of Ether in your wallet should always be slightly more than the amount you want to send. When a user’s ETH balance is too low, it’s better to avoid transferring ERC-20 tokens.
Fees for delivering Ethereum assets to a smart contract address, such as an initial coin offering (ICO), will grow since the transactions are more sophisticated and need more interactions.
What is the best ERC-20 tokens wallet/Exchange?
Despite the fact that there are various wallets that may be used to store ERC-20 tokens, determining the best ERC-20 token wallet to meet your needs is simple. It can be in the form of a hardware wallet, a mobile wallet, a web wallet, or even a desktop wallet. The following is a list of exchanges or wallets where ERC-20 tokens can be stored or exchanged.
WhalesHeaven is a P2P crypto trading platform. The platform operates using secure multi-signature wallets that process each occurring deal. The platform supports trading ERC-20 to BEP-20 tokens, Bitcoin, Stablecoins and a wide variety of gaming coins from various users to exchange with.
This gives it an advantage over the competition since it has a multi-signature function, which is an important safety feature.
WH Cypher is a WhalesHeaven Multi-sig wallet extension that allows crypto users to execute trades without revealing their personal information. It allows users to sign the release of their transactions, also it lets users store their ERC-20 and other tokens without concern of cyber theft or security breaches.
Binance Exchange continues to be one of the top cryptocurrency exchanges in the world by offering users the most cryptocurrency trading pairs of any trusted exchange, resulting in Binance having the highest trading volume of any crypto exchange.
Ledger Nano X wallet
The Ledger Nano X is a high-end cryptocurrency hardware wallet that offers an impressive amount of features as well as top-tier security. The Ledger Nano X supports over 1300 crypto assets and tokens including all the major ones such as Bitcoin, Ethereum, EOS and Litecoin and up to 1,250 ERC-20 tokens.
Coinbase is one of the biggest cryptocurrency exchanges in the world with unparalleled trading volume and a long-standing reputation for industry-leading security. It’s simply one of the best ways to buy ERC-20 tokens.
Trezor is an ERC-20 token-compatible hardware wallet. It includes a fantastic user interface that everyone can understand, as well as a 12-digit passcode that users must remember for future use.
MyEtherWallet, one of the most popular web-based wallets for Ethereum-compatible currencies and tokens, saves private keys to your computer. Smart contracts may also be written and accessed via MyEtherWallet.
The ease of use of MetaMask has contributed to its broad appeal. It’s an Ethereum wallet browser plugin that also gives you access to DApps. For example, you can easily add MetaMask to Chrome.
Pros of ERC-20 tokens
ERC20 tokens are popular for a reason, and here are some of the reasons why:
- Conveniency: ERC-20 tokens are simple and easy to deploy
- Token standardization: Ethereum provides the token specification that includes interaction rules between different tokens and token purchase rules
- Liquidity: If the projects based on Ethereum are active and interact with each other, that brings more projects and more users to the Ethereum network.
- Defined roadmap for developers. The ERC-20 standard provides developers with a blueprint that allows them to create new tokens quickly and easily rather than starting from scratch.
ERC-20 is likely to be one of the most widely used standards by many developers throughout the world. However, it isn’t without flaws.
Cons of ERC-20 tokens
Despite its many positive attributes, ERC-20 tokens have several shortcomings and issues that they do not address. The following are a few of them:
- Transfer bugs
- Expensive gas fee
- Slow transactions
- Low entry points
Other Types of ERC-Token Standards which can be found on exchanges
Apart from ERC-20, there are a number of other token standards. All of them have a special purpose and are built from the ground up or on top of the ERC-20 specs. The most often used token standards are listed below:
ERC-223: It addresses the issue of unintentional token transfers caused by selecting the incorrect network. Token transfers to addresses that are not part of the Ethereum network are rejected by ERC-223. Sending tokens to the Binance Smart Chain (BEP-20 standard), for example, will be rejected, but no funds will be lost.
ERC-721: This is the de-facto non-fungible token standard (NFTs.) Tokens lose their fungibility under this norm, making them one-of-a-kind in every way. One ERC-721 coin is not the same as another ERC-721 token, for example. With Ethereum, however, every ETH token has the same features and value as every other ETH token.
ERC-677: This is a token standard that leverages the “transfer and Call” function that is utilized by decentralized oracles, particularly Chainlink. The function may be used to provide tokens to a contract and then have the contract deliver freshly acquired data, which is very handy for oracles because they not only send currency but also data.
The cryptocurrency sector has undoubtedly been influenced by ERC-20 tokens. They are not only responsible for the billion-dollar ICO sector, but they are also promoting the use of digital assets.
When the freshly minted ERC-20 tokens are launched, they may be added to exchange platforms like Whalesheaven without any interaction between the cryptocurrency and exchange creators. But only if the ERC-20 standard is followed. As a consequence, there will be less danger, less complexity, more consistency, and more liquidity of tokens, resulting in greater user confidence.