With the emergence of Ethereum, which currently holds the title of the second largest blockchain, the concept of “ERC-20” entered our lives. In this article, you can find answers to frequently asked questions such as what is ERC-20, how does it work, and what are the features of ERC-20 tokens. As Kriptokoin.com, we have researched and compiled for you.
What is ERC-20?
Many blockchains, including Bitcoin, only work as blockchains. However, Ethereum is not just a blockchain, it is also a platform. Users can create decentralized applications (dApps) and tokens on the Ethereum Blockchain. In the past, Ethereum created certain rules for users who wanted to create tokens, and thus the ERC-20 standard was born.
ERC-20 standard is one of the smart contracts running on the Ethereum Blockchain. Smart contracts are contracts with specific protocols and standards. Developers can create their own tokens using this smart contract on the Ethereum network. Many of today’s major crypto assets were originally created on the Ethereum blockchain. Some cryptocurrencies, such as Uniswap, continued to use the Ethereum contract. Other cryptocurrencies such as Binance Coin have migrated to their own blockchains over time.
What are the features of ERC-20 tokens?
ERC-20 tokens are the most widely used token type on the Ethereum network. Such cryptocurrencies are also sometimes referred to as utility tokens. More than 300 tokens were created on the basis of this smart contract. These tokens are used as a means of payment for various transactions and have various stable properties.
The first of these is that they are produced in limited numbers. These tokens have a maximum supply and their number in the market can never exceed the predetermined supply. Such tokens are tradable, meaning they can be traded. They can also be sent from one address to another. Tokens with this contract are Binance, Coinbase, etc. It can be traded on many major crypto exchanges. To store Ethereum-based tokens, you need to have an Ethereum-supported wallet such as MetaMask.
What are the advantages?
- Thanks to this standard, developers can create cryptocurrencies without having to produce a blockchain.
- A token generated by this contract can easily interact with other entities holding the same contract.
- Allows generating a token suitable for almost all projects and platforms.
- Tokens with this contract can be used as a means of payment.
- Allows the generation of tokens that can be used in transactions in the NFT and DeFi space.
What is ERC-20? What are the disadvantages?
- Projects in the DeFi and NFT field usually generate their tokens with the aforementioned standard. The number of tokens with this contract is quite large. Depending on the large number of tokens, the Ethereum network may slow down from time to time. The congestion causes the transaction speed of the tokens with the mentioned contract to decrease.
- This standard is very popular in the blockchain space. For this reason, tokens using this contract are often the target of hackers.
- Creating tokens through the aforementioned smart contract has become quite easy. Therefore, there are quite a few non-functional tokens using this standard.
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