What are ERC-20 tokens and how to deal with it?
New technologies for cryptocurrencies – what are ERC-20 tokens
The history of cryptocurrencies goes back over 10 years. The first project was Bitcoin, before other companies came along after appreciating the simplicity and convenience of such technologies. One of the best alternatives was Ethereum, created by Russian-Canadian programmer Vitaly Buterin. This cryptocurrency became a real sensation because it used very interesting and convenient technologies. In this article, you will learn what is the ERC-20 standard and other useful information.
One of the innovations of Vitalik Buterin was the ERC20 standard. Its peculiarity is the definition of the requirements for the functioning and the mechanism of operation of the cryptographic tokens located in this system.
The abbreviation stands for Ethereum Request for Comments. The number 20 is a number to identify a specific offer. In 2015, the technical features issued on the ETH blockchain were announced. Those ERC-20 tokens that comply with the standard are smart contracts that operate on the Ethereum blockchain.
This is made possible by the fact that the protocol defines a set of rules for accepting tokens in the system. Formed according to the standard, the coins easily interact with the rest, located here. They are blockchain assets that have a certain value on the cryptocurrency exchange, can be sent to other users, received, and also perform other actions like other electronic coins.
Features of the work of ERC-20 standard tokens
For cryptocurrencies, like software, a “standard” is a specific set of features and developer requirements. When creating a new product, the currency will be compatible with the system, as it follows the rules. ERC 20 sets out the requirements for the functioning of tokens mined in the Ethereum cryptocurrency chain. Accordingly, all created tokens in the blockchain fit into this standard.
The important thing is that the program is open source. Therefore, the answer to the question “can you mine ERC-20” is “yes”. Each developer gets the opportunity to open the original data on the project’s GitHub site. This helps to create new coins that comply with the specified standard, that are fully compatible with it. The main purpose of the introduction was the need to simplify transactions between Ethereum wallets, exchanges, and smart contracts.
Smart contracts are always used to generate new tokens. Thanks to them, transactions are carried out between the parties to the transaction, and the amount of funds in the account of each of them is also taken into account.
On the Ethereum blockchain, tokens are commodities involved in trading. These can be coins, loyalty points, and more. Ethereum allows users to create cryptocurrencies compatible with software clients that fit perfectly into digital wallets that work according to established standards. Smart contracts are used here for data transfer. They are self-starting, and run on the system and handle information and code, work with other contracts, etc. The Solidity language is used to create contracts. Ethereum funds are stored in the MetaMask digital environment.
Features of cryptocurrency and what can ERC-20 tokens do
You already know how are ERC-20 tokens created. Now you need to understand how operations are carried out with them. ERC-20 tokens also belong to the ETH network but have a different designation. The blockchain can conduct transactions with them and process data. Smart contracts operate on the blockchain principle. Tokens created in this way are not independent, although they differ from the original ones. They operate on the Ethereum blockchain, so the computing power of this chain has a certain impact.
A transaction involving such coins is carried out as follows:
- the buyer transfers funds to the smart contract;
- funds are automatically redirected to the owner of the contract (this is also done using a robot);
- the robot transfers to the paying person the tokens that the ICO creator had.
Other ERC standards
The technology turned out to be very convenient and productive, which led to further development. Today there are coins ERC-20, ERC-155, ERC-223, ERC-721, what`s the difference you can find out below.
- ERC-223. There is a drawback in the ERC-20 system – people can carry out a transaction on a smart contract, believing that they are sending them to a regular wallet – thus, some users’ money has already been lost. In ERC-223, this error is fixed – here you can transfer tokens to smart contracts and wallets with one function. In addition, with ERC-223, unlike ERC-20, a transfer requires one operation, not two, which means half the amount of Ether to pay for it. It is considered that this standard is the most promising for the future.
- ERC-721 – became known at the end of 2017. The main difference is that the program allows you to create non-convertible tokens (NFT). That is, within the same platform or ecosystem, there can be tokens with different values.
- ERC-155. Another way to fix ERC-20 flaws. Thanks to ERC-155, it is more difficult to lose tokens, as multiple transaction processing mechanisms are now available. It uses a registry to provide validation of supported features. There is also the concept of “approved operator” – users can trust the smart contracts and transfer money on their behalf.
TOP ERC-20 tokens
Many investors and users believe that technology has very good prospects, especially after the deficiencies have been addressed. Therefore, the question of how to buy ERC-20 tokens is asked very often. Moreover, today there is an ERC-20 tokens list of cryptocurrencies that are popular right now.
- EOS. The capitalization of this cryptocurrency is about $6 billion. This is the largest indicator among cryptocurrencies based on the ERC 20 standard. EOS has its own Blockchain and uses Ethereum tokens. It also provides support for solutions that use open source for dApps applications.
- Tron. The protocol was created for the entertainment industry. Tron has its own Blockchain. Standard publishing systems go through censorship and heavy scrutiny. The same applies to the promotion of media content. Authors were often left without the opportunity to realize their full potential and could not receive remuneration. Tron allows content to be posted decentralized. Cryptocurrency provides direct alignment of the consumer and the content creator, excluding intermediate stages of control. The first major user of this cryptocurrency was the Chinese Peiwo App.
- OmiseGo. The main goal of introducing a cryptocurrency based on ERC-20 technology is the gradual transition of almost all financial services to a decentralized base. A full migration would give users full access to these services without being tied to a bank account.
- Icon. The cryptocurrency is embodied by the Korean company Dayli. The main goal of creating a cryptocurrency was to increase the efficiency of the process of exchanging data between institutions that differ in their type of work, industry, and other characteristics. The concept was used to implement this process. This is a high-performance chain. The connection of blockchain elements is present without the participation of intermediaries. It does not require interaction with the information storage service, as well as centralized hosting.
- BinanceCoin. This Ethereum-based cryptocurrency was created to facilitate the implementation of electronic coin procedures on the Binance exchange. BNB has its own Blockchain. The main goal was to switch the commission on the exchange to itself. The plans included its development into a platform, which would allow a further exchange of smart contracts.
The unification of functions and the simpler development of tokens provided an opportunity for the penetration of the blockchain principle into completely different areas of human life.