If you’re interested in the cryptocurrency market, you’ve probably come across the term ERC-20 token. ERC-20 is a protocol standard offered by Ethereum, currently the second largest blockchain network, which allows developers to create tokens. But what exactly is ERC-20, and what are the features of tokens created with this standard? In this guide of Zatrun.com, you can find everything you need to know.

What is ERC-20?

ERC-20 is a protocol standard set and accepted for tokens that operate on the Ethereum blockchain. This technical standard provides a list of rules that Ethereum-based tokens must follow. In addition, it has provided many advantages since the beginning of the cryptocurrency market. It has allowed developers to easily create tokens and ensured that tokens function compatibly for users.

ERC-20 is similar to Bitcoin, Litecoin, and other cryptocurrencies. However, tokens created with this standard are blockchain-based assets that can be traded on the Ethereum network, unlike Bitcoin and Litecoin which have their own blockchain. There are approximately 450,000 tokens created with this standard on the Ethereum network. The smart contract includes information on how tokens will be transferred and how transactions will be confirmed. Additionally, it provides information and rules on the total supply and data of the token that users can access.

What are the Advantages?

ERC-20 is a technical standard that ensures compatibility of tokens on the Ethereum blockchain network. It saves the project team time as it has high-quality code. In addition, this standard increases the interaction between tokens. Tokens with this standard are secure, low-cost, user-friendly, automatic, quickly invested, widely used, and high-earning cryptocurrencies. They also have high transaction flow and can withstand traffic congestion. Ethereum is the largest blockchain that supports creating tokens and Dapps. Therefore, tokens created with this standard are more easily adopted.

What are the Disadvantages?

DeFi and NFT projects mostly create their tokens using the ERC-20 standard, causing the number of tokens to constantly increase. However, this can cause congestion, leading to a slowdown in the Ethereum blockchain. The popularity of the standard also makes it a frequent target for hackers. Creating tokens via smart contracts is easy, so there are many useless or fraudulent tokens created with this standard.