What is the ERC20 token standard?

This article explores the importance and application of the ERC20 token standard in the Ethereum ecosystem. The article provides a detailed introduction to the definition, implementation methods, core functions, and application in smart contract development of the ERC20 standard. For blockchain developers, investors, and cryptocurrency enthusiasts, this article provides a comprehensive opportunity to understand ERC20 tokens. By reading this article, readers will grasp the technical details and practical applications of ERC20 tokens, laying a solid theoretical foundation for participating in the Ethereum ecosystem.

How is the ERC20 token standard defined and implemented?

The ERC20 token standard is one of the most widely used token standards on Ethereum, which defines a set of unified interface specifications, enabling different tokens to seamlessly interact within the Ethereum ecosystem. The ERC20 standard was proposed by Fabian Vogelsteller in November 2015 and formally adopted by the Ethereum community in September 2017.

The ERC20 standard defines 6 mandatory functions and 2 optional events. These functions include:

1. totalSupply(): Returns the total supply of tokens
2. balanceOf(address _owner): Returns the token balance of the specified address
3. transfer(address _to, uint256 _value): Transfers tokens
4. transferFrom(address _from, address _to, uint256 _value): Transfers tokens from one address to another
5. approve(address _spender, uint256 _value): Authorizes a third party to spend tokens
6. allowance(address _owner, address _spender): Queries the allowance

Two optional events are:

1. Transfer(address indexed _from, address indexed _to, uint256 _value): Triggered when a transfer occurs
2. Approval(address indexed _owner, address indexed _spender, uint256 _value): Triggered when an approval occurs

When implementing the ERC20 token standards, developers need to write the specific logic for these functions and events in the smart contract. Typically, developers use the Solidity language to write smart contracts and utilize libraries like OpenZeppelin to simplify the development process. These libraries provide audited and tested implementations of ERC20, which can greatly reduce the difficulty of development and security risks.

What are the core functions and application scenarios of ERC20 tokens?

The core functions defined by the ERC20 token standard make it an essential part of the Ethereum ecosystem. These functions include:

1. Transfer functionality: Users can transfer tokens from one address to another.
2. Balance inquiry: Anyone can inquire about the number of tokens held by a specific address.
3. Authorization mechanism: Token holders can authorize third parties to use their tokens, providing a foundation for decentralized exchanges and other DeFi applications.
4. Total supply management: Contracts can define and manage the total supply of tokens.

These core features support the widespread application of ERC20 tokens in various scenarios:

1. Decentralized Finance (DeFi): ERC20 tokens are the cornerstone of the DeFi ecosystem, used for lending, liquidity mining, yield aggregation, and various other applications.
2. Governance Token: Many decentralized autonomous organizations (DAOs) use ERC20 tokens as a measure of voting weight.
3. Stablecoin: Stablecoins such as USDT and USDC are all implemented based on the ERC20 standard.
4. Asset Tokenization: Digitally representing real-world assets (such as real estate, artwork) on the blockchain through ERC20 tokens.
5. In-game tokens: Many blockchain games use ERC20 tokens as in-game currency or reward mechanisms.

The flexibility and interoperability of ERC20 tokens make it one of the most popular token standards in the Ethereum ecosystem. According to statistics, as of 2025, the total market value of the Ethereum ecosystem exceeds $1 trillion.

Conclusion

The ERC20 token standard has become the cornerstone of the Ethereum ecosystem, opening up new horizons for decentralized finance and digital asset management. From smart contract development to ICO applications, the flexibility and interoperability of ERC20 have shone in various scenarios. Despite the market’s ups and downs, ERC20 remains the preferred token standard for blockchain projects, driving continuous innovation in the crypto economy. In the future, with improvements in regulatory environment and technological advancements, ERC20 is expected to play a role in broader fields.

Risk Warning: The cryptocurrency market is highly volatile, and the value of tokens may fluctuate significantly. Regulatory policy changes may affect the compliance and application scope of ERC20 tokens.