If you’re just getting started in the world of the Ethereum blockchain and the plethora of different smart contracts based therein, you’ve probably noticed a term people like to throw around when describing their own tokens.
But what does that actually mean? It obviously seems like something related to governing smart contracts on the Ethereum blockchain, but that’s about as descriptive as saying it starts with an “E.” Let’s have a look at the details.
Having only been formerly added to the Ethereum framework last month, ERC-20 is actually pretty new (it’s been under development for quite some time, but has only recently left the “draft” stage). Check out this article published by Coindesk exactly one month ago today announcing the formalization and implementation of the ERC-20 framework!
Prior to ERC-20, a lot of tokens built within the Ethereum blockchain acted quite differently from one another in terms of the structure and function of their code. This caused all kinds of problems for developers as they could never quite tell how a token would behave, or whether or not it would be compatible with specific wallets, services, other tokens, and so on.
ERC-20 solves this by creating an explicit standard for all tokens residing in the Ethereum blockchain. It lays out a systematic and universally applicable set of rules that allows developers to create new tokens in a way that is compliant and cooperative with what already exists.
The benefit to developers and the entire Ethereum community at large is enormous. ERC-20 compliant tokens have all the basic functionality of Ether itself, and can thus be seamlessly utilized and stored across different wallets and platforms. Developers no longer have to consider the daily dynamism of the open source Ethereum blockchain, but can instead turn to the published ERC-20 guidelines for information on how to develop their services in a way that allows them to act predictably and uniformly in relation to everyone else.
To be even more specific, the ERC-20 framework is built around 6 key functions. They are as follows:
approve , and
allowance. These functions allow ERC-20 compliant tokens to perform all of their basic functions in a uniform way. To read a more in-depth analysis of how each of these functions perform, I suggest having a look at this article from news.21.co!
To wrap up this article, it’s worth noting that the ERC-20 framework is only a first attempt at standardizing tokens created on the platform and is thus subject to updates and changes as issues are discovered and fixed by the community at large. Have something to say about how ERC-20 could be improved? Comment below!