The Tech Quiz - Season 23

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What are ERC-20 tokens?

First of all, it's important to know the meaning of the term "ERC-20". It is the abbreviation for "Ethereum Request For Comment".

ERC-20 tokens are the standard for tokens created using the Ethereum Blockchain. These tokens are fungible or simply put, can be substituted, exchanged or replaced with something of equal value. In other words, when new tokens are created on the Ethereum Blockchain, ERC-20 makes sure these tokens can be replaced or exchanged with other tokens.

ERC-20 was proposed by Fogen Vogelsteller, a developer, in 2015. He developed it in order to curb the problem of lack of standard within smart contracts in the Ethereum Blockchain. The proposal was approved in 2017 as Ethereum Improvement Proposal, EIP-20. However, it is still regarded as ERC-20 because that was the name given to it when it was proposed.

Some examples of ERC-20 tokens are Uniswap, Chainlink, USD coin, USDT, etc.

How do ERC-20 tokens benefit Ethereum?

The benefits of ERC-20 are countless. I'll list a few.

• Interoperability: This is the ability of systems to interact with each other and exchange information without any form of access restrictions. ERC-20 tokens are easily traded and exchanged therefore they are easily integrated into Ethereum applications, fostering interoperability among these apps.

• Standardisation: ERC-20, the standard of Ethereum token development has gone a long way in simplifying token development and promoting innovation.

• Accessibility: These tokens can be stored and accessed by a wide range of wallets leading to different users being able to access the tokens without stress.

Why are ERC-20 tokens significant in Ethereum?

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• As we've said before, ERC-20 tokens are the standard for all other tokens in the Ethereum Blockchain therefore they are super important.

• Liquidity: The spread of ERC-20 tokens have resulted in the liquidity of Ethereum, increasing the growth of liquidity pools and DEXs.

• Scalability: The ERC-20 token is in control of the security features of the Blockchain, increasing transaction and smart contract efficiency.

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