What is an ERC20 Token?

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ERC20 tokens are one of the most foundational elements of the Ethereum ecosystem, powering thousands of decentralized applications, fundraising campaigns, and digital assets. These tokens have revolutionized how projects launch, how users interact with blockchain technology, and how value is transferred across networks. In this guide, we’ll break down what ERC20 tokens are, how they work, which popular cryptocurrencies use the standard, and how to store them securely.

Whether you're new to crypto or expanding your blockchain knowledge, understanding ERC20 is essential for navigating today’s digital asset landscape.

Understanding ERC20 Tokens

ERC20 stands for Ethereum Request for Comments 20, a technical standard used for smart contracts on the Ethereum blockchain. It defines a common set of rules that all fungible tokens must follow to ensure compatibility across platforms, wallets, and exchanges.

Launched in 2015, Ethereum introduced more than just a cryptocurrency — it enabled developers to build decentralized applications (dApps) using smart contracts. The ERC20 standard emerged as a critical tool within this ecosystem, allowing anyone to create a token that works seamlessly with existing infrastructure.

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These tokens are not standalone blockchains like Bitcoin or Litecoin. Instead, they run on top of the Ethereum network, leveraging its security and consensus mechanism. Every ERC20 token transaction uses ETH to pay gas fees, even if you're only sending tokens.

Key functionalities defined by the ERC20 standard include:

This uniformity allows wallets like MetaMask, Trust Wallet, and Ledger to support thousands of tokens without needing custom integration for each one.

One of the most transformative uses of ERC20 was during the Initial Coin Offering (ICO) boom of 2017–2018. Startups raised billions by issuing their own tokens in exchange for ETH or BTC. Because these tokens followed the ERC20 standard, investors could easily receive, store, and trade them.

"In 2018, as part of a hackathon, I created a cryptocurrency in about 20 minutes using the ERC20 token standard. It cost me around AUD $30 in ETH at the time. The goal was to use the tokens as reward points automatically paid to users who adopted green financial products. This helped me bring my prototype to life with a functional digital currency I could send to judges and participants."

This story illustrates how accessible and powerful the ERC20 framework is — enabling rapid innovation with minimal technical overhead.

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Popular ERC20 Tokens in Use Today

Many of the world’s most widely used cryptocurrencies began as — or still operate as — ERC20 tokens. While some projects later migrate to their own blockchains, numerous major tokens remain on Ethereum due to its robust network effects and developer support.

Here are some notable ERC20-based digital assets:

Even though some tokens may exist across multiple chains today (via bridging), their original or primary issuance often remains on Ethereum as an ERC20 token.

Important Note:

Some projects launch their token as ERC20 before launching their own blockchain. When migration occurs, users must swap their ERC20 tokens for native coins on the new chain. Sending tokens to a wallet on the wrong blockchain can result in permanent loss. Always verify the correct network before transferring any assets.

How to Store ERC20 Tokens Securely

To hold ERC20 tokens, you need a wallet compatible with the Ethereum network. Fortunately, many popular wallets support ERC20 natively.

Common options include:

When choosing a wallet, consider whether you prioritize convenience (hot wallets) or maximum security (cold wallets). Regardless of choice, always back up your recovery phrase and never share your private keys.

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For added safety:

You can also monitor your token balances using blockchain explorers like Etherscan by entering your wallet address.

Frequently Asked Questions (FAQ)

Q: Are all Ethereum-based tokens ERC20?
A: No. While ERC20 is the most common standard for fungible tokens, others exist — such as ERC721 for non-fungible tokens (NFTs) and ERC1155 for semi-fungible tokens.

Q: Can I send an ERC20 token to any Ethereum address?
A: Yes — as long as the receiving wallet supports ERC20 tokens and is on the Ethereum mainnet. However, always confirm compatibility before sending.

Q: Do I need ETH to transfer ERC20 tokens?
A: Yes. All transactions on the Ethereum network require ETH to cover gas fees, including sending or swapping ERC20 tokens.

Q: What happens if I send an ERC20 token to a non-compatible wallet?
A: If the wallet doesn’t recognize ERC20 tokens or is on a different network (like BSC), you risk losing access to your funds permanently.

Q: Can a token be both ERC20 and exist on other chains?
A: Yes. Many tokens are cross-chain through bridges or wrapped versions — for example, USDT exists as an ERC20 token on Ethereum and as a BEP-20 token on Binance Smart Chain.

Q: Is it safe to create an ERC20 token?
A: The process is technically simple, but deploying a secure contract requires auditing. Unaudited or flawed contracts can lead to exploits or loss of funds.

Final Thoughts

ERC20 has become the backbone of tokenization on Ethereum, enabling innovation at an unprecedented scale. From stablecoins and governance tokens to utility assets in gaming and DeFi, its impact is undeniable.

As blockchain technology evolves, so too will token standards — but ERC20 remains a cornerstone of modern crypto infrastructure. Whether you're investing, building, or simply learning, understanding how ERC20 works gives you a crucial advantage in the digital economy.

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By following best practices for storage, transfer, and verification, you can safely participate in this growing ecosystem. Stay informed, stay secure, and make the most of what decentralized finance has to offer.