Taguatinga, Brasilia, Brazil

CRYPTO GLOSSARY: ERC-20 TOKENS

To begin better understanding ERC-20 Tokens is essential to explain the platform for its creation, Ethereum, which is a decentralized platform responsible for executing intelligent contracts and, opposite to common sense, not a token. The native cryptocoin of Ethereum, in its turn, is called Ether. Furthermore, Ethereum tokens are digital assets that are built in the top of the Ethereum blockchain

The emergence of the ERC-20 pattern was due to the lack of compatibility with different kinds of Ethereum tokens with an intelligent contact strictly unique. Therefore, developers always had to write a completely new code to make the token available for trading in bourses or exchanges. And if only the fact of doing it was really laborious, doing so in an increasing number of token became even more problematic. Affecting time and practicality. As a result, a default protocol has been created for all tokens.

But why ERC-20?

The technical specifications about the tokens built in the Ethereum blockchain were published originally in 2015. The acronym ERC comes from Ethereum Request for Comments, an official protocol to make new suggestions and optimize the Ethereum network. 20 is the unique identification number of the offer. Although the ERC-20 tokens work within the framework installed by the Ethereum command, its structure is quite broad, giving developers more flexibility for creation.

The ERC-20 pattern defines a set of rules that must be respected in order for a token to be accepted and able to interact with other tokens on the network. The tokens themselves are block assets, which can have value and can be sent and received like any other crypto.

Some of those standards

Mandatory

  • Transfer
  • TotalSupply
  • TransferFrom
  • BalanceOf
  • Approve
  • Allowance

Optional

  • Token Symbol
  • Symbol
  • Decimal (up to 18)

One positive point of Ethereum is its ability to support decentralized applications (DApps), built on the existing Ethereum blockchain. Consequently, Ethereum charges developers for the computing power in the network – which can only be paid in Ether, the only inter-platform currency. And, depending on its purpose, DApps might develop ERC-20 tokens to function as a currency, for points in a loyalty, a share in the company or even proof of ownership.

However, ERC-20 token standards have some issues that are not addressed. In some situations, a token might be unintentionally destroyed when they are used as payment for a smart contract rather than using Ether. Is estimated that $3 million had been lost due to it. In this case, Ethereum community is working on a new standard name ERC-223. These standards are not compatible with ERC-20, but its developers are encouraged to continue using ERC-20 until compatibility is realized.

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