What is ERC 20? ERC 20 is a token issuance standard on the Ethereum network. So what is the difference between ERC and ERC 721 or ERC 1155? Let’s find out together in the article below.
To better understand ERC 20, people can refer to some of the articles below:
- What is ERC 1155? Harmonious Combination Between ERC 20 and ERC 721
- What is ERC 6551? The Game-Changing New Standard in the NFT Space
- What is ERC 721? Standards for NFTs on Ethereum
What is ERC 20?
Overview of ERC 20
ERC stands for “Ethereum Request for Comments”, which is a standard proposed and launched to improve the Ethereum network. ERC standards are used to design Tokens, Smart Contracts and other DApps on the Ethereum network.
ERC 20 is a standard for issuing a token on the Ethereum network. The ERC-20 standard was proposed by Fabian Vogelsteller in November 2015. ERC 20 provided a specific guide on how the standard token includes how to interface with Smart Contracts and digital wallets on the Ethereum network. ERC 20 has made exchanging and buying and selling tokens on exchanges more convenient and easier.
Since its inception, ERC 20 has contributed to strongly promoting the economy on Ethereum.
Standards for ERC 20 release
In order for developers to create ERC 20 tokens, they are required to follow 6 mandatory rules and 3 custom rules.
The 6 mandatory rules include:
- Total Supply: Total supply of issued tokens.
- Balance Of: Check token balance in Ethereum wallets.
- transfer: Function to manage token movement to user wallet addresses.
- transfer From: Allows token holders to exchange and transfer tokens between each other.
- Approve: Checking each user transaction helps the total supply not change and also prevents users from fraudulently creating more tokens.
- Allowance: Check the balance to see if the wallet address has enough tokens to send?
3 custom rules included:
- Token Name: The token name is usually the project name.
- Symbol: Token code
- Decimal: How small the token can be divided. For example, Bitcoin can be divided up to 1 satoshi and 1 Satoshi = 0.00000001 BTC.
Advantages and Disadvantages of ERC 20 Standard
Advantages of ERC 20
Some of the outstanding advantages of ERC include:
- Save time & costs: Uniforming an ERC 20 standard saves time and costs in development.
- High compatibility because ERC 20 is supported by all e-wallets, AMM, Lending & Borrowing, etc. in the crypto market.
- ERC 20 is easy to create and deploy, providing many savings for developers.
Disadvantages of ERC 20
Besides the advantages, ERC 20 has some outstanding disadvantages including:
- High cost: With the Ethereum network becoming increasingly congested, using ERC to trade, buy, sell, or interact with smart contracts can be time consuming and costly.
- Security: ERC 20 Tokens can be attacked using vulnerabilities in smart contracts on Ethereum.
- Scam: Creating ERC 20 is so easy that almost anyone can create their own ERC 20. So there is more fraud in the crypto market with ERC 20 tokens.
- ERC’s static structure with few flexible rules prevents ERC Token from having diverse features.
Summary
ERc 20 plays an important role in the Ethereum ecosystem. Up to now, ERC 20 are the most popular and most numerous tokens on the network.
