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ERC-20 Tokens: What They Are and How They Are Used

WhitepayPosted 18.09.2023 • 15 mins read

Whitepay NewsERC-20 Tokens: What They Are and How They Are Used

How did Ethereum shock up the whole Bitcoin scene? What are ERC-20 tokens? And why do we even need them? Whitepay explains.

Key takeaways

ERC-20 is a technical standard for smart contracts on the Ethereum blockchain that developers must adhere to when creating new tokens.
ERC-20 defines a set of interoperability rules so that a token can interact with other tokens and platforms.
The emergence of the ERC-20 standard was a revolutionary change in the process of creating tokens. Before that, developers had to write new code every time.

Until 2015, the prevailing paradigm dictated that creating a new digital currency necessitated the development of a new blockchain. As usual, Bitcoin set the initial trend. However, Ethereum shattered this pattern. Consequently, we can now see a vast number of digital assets. And much fewer blockchains.

In this article, we delve into what ERC-20 tokens are, explore the issues that spurred their emergence, and examine how Ethereum revolutionized the Web3 landscape. We'll also provide insights into how to sell ERC-20 tokens and provide examples of ERC-20 tokens.

What Are ERC-20 Tokens?

So, which coins are ERC-20 tokens? Adherence to the ERC-20 standard ensures that Ethereum blockchain tokens are deployed correctly through smart contracts. Smart contracts guarantee token functionality across the Web3 platform.

Thanks to the implementation of this standard, ERC-20-compatible tokens provide access to Ethereum-based projects or services. It facilitates that ERC-20 tokens are easily transferred between users and within various decentralized applications.

ERC-20, which stands for "Ethereum Request for Comments," is used to propose changes to the Ethereum system, and "20" denotes its sequence number. Utility tokens were given a standardized framework thanks to a proposal by Ethereum developers back in 2015.

Why Do We Need the ERC-20 Token Standard?

How many ERC-20 tokens are there, and what's the ERC-20 token price? Let's explore.

To start, a token on the Ethereum blockchain can represent a wide array of things, including lottery tickets, online platform reputation points, in-game character skills, financial assets, and much more. Essentially, a token can take on almost any form. So, is ERC-20 the same as ETH?

The primary unit of account within the Ethereum blockchain is a coin; in Ethereum's case, it's Ether (ETH). Simultaneously, any user can create a token based on Ethereum, an ERC-20 token, and use it for specific purposes.

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This became possible thanks to the integration of smart contracts. However, a compatibility issue occurred.

For instance, the development team at an exchange had to write new code each time for every token they intended to interact with on their platform. This is where the need to introduce technical standards became evident.

The ERC-20 token standard, in conjunction with smart contracts, streamlined the issuance of new tokens. Additionally, it solidified Ethereum's position as the first blockchain platform in history that enables the development of apps, various Web3 projects, crypto lending services, and more.

As for the number of ERC-20 tokens and their current prices, these aspects can vary greatly and are subject to the dynamic nature of the cryptocurrency market.

Features and Capabilities of ERC-20 Tokens

Among the diverse technical standards set forth by the Ethereum blockchain, ERC-20 tokens hold a unique position. Among them, fungibility is a common trait, making each asset exchangeable for another. This characteristic lends them a broad range of applications:

Financial assets.
ERC-20 tokens function as a means of transferring value on the Ethereum blockchain as a digital currency.
ICO (Initial Coin Offering).
The choice to use ERC-20 tokens is common among projects launching ICOs, in order to raise capital.
Access to the platform.
Tokens can grant access to specific services or resources on the Ethereum platform.
Loyalty programs.
Loyalty program participation is rewarded with ERC-20 tokens by projects.
Voting.
With ERC-20 tokens, participation in community or project voting is possible.
Staking.
Tokens lend themselves well to staking, allowing for asset storage for a set timeframe.
Access to the ecosystem.
ERC-20 tokens provide a means to participate in Ethereum-based services and applications.
Payment systems.
Technology enables the development of multiple payment methods and their corresponding applications.
Decentralized exchanges.
How to swap ERC-20 tokens? Some decentralized exchanges (DEX) rely on such cryptocurrency to facilitate the exchange of digital assets among users.
DeFi applications.
ERC-20 tokens are vital for creating tools and applications in decentralized finance, such as lending and farming.

At the core, these tokens can be customized to suit the specific needs of projects or communities while adhering to the ERC-20 technical standard.

ERC-20 Wallet

ERC-20 tokens are a vital part of the Ethereum blockchain and are compatible with wallets that are tailored to this network. These encompass nearly all platforms designed for holding and trading digital assets. This widespread compatibility directly results from the huge popularity of the Ethereum blockchain and platform.

For example, the WhiteBIT cryptocurrency exchange's wallet fully supports ERC-20 tokens. As an added advantage, this wallet enables fee-free transfers of digital assets when paying for goods and services. We will delve deeper into this feature in the upcoming section.

ERC-20 Tokens List

ERC-20 Tokens.png
Here are the most popular ERC-20 tokens:

Tether (USDT)
1inch (1INCH)
Axie Infinity (AXS)
Chainlink (LINK)
Uniswap (UNI)
yearn.finance (YFI)
The Sandbox (SAND)
Aave (AAVE)
Polygon (MATIC)
Shiba Inu (SHIB)

How to Pay with ERC-20 Tokens?

Nowadays, businesses are actively embracing digital assets as a form of payment. In addition to utilizing ERC-20 tokens within the Ethereum ecosystem, they can also serve as a means to purchase goods, services, and even facilitate crypto donations. This is precisely why the Whitepay solution was developed. You can try it in stores and partner services via the link.

Whitepay allows you to make purchases with ERC-20 tokens, offering low transaction fees and compatibility with various ERC-20 wallet addresses. To complete a transaction, you simply select your preferred currency (Whitepay supports over 200 digital assets) and the ERC-20 network. Let's illustrate this process with an example.

So, we want to donate digital currency using an ERC-20 token:

This is what the Whitepay page looks like. We choose "Any wallet."

Select the desired currency and the ERC-20 network. Also, you can view the network fee and the approximate donation amount in USDT (about 1:1 to USD).

If you wish, you can leave an email and a comment and then click "Donate."

To initiate a transfer, scan the QR code using the wallet code scanner. Alternatively, you can copy the fund's address and manually enter it in the withdrawal address field in your wallet.

Then, all that's left is to confirm the transaction in your wallet. The entire process took us no more than 5 minutes.

Conclusion

The ERC-20 token standard once revolutionized the perception of blockchain and elevated Ethereum as one of the most renowned platforms for designing Web3 projects and applications. Now, any developer can release their digital asset without needing to create a new blockchain.

Today, these tokens serve various purposes, such as facilitating DeFi lending, representing character skills in gaming, enabling voting, participating in loyalty programs, and more. They can be traded for goods and services and also used to make crypto donations.