🪙 What is an ERC-20 Token ?
If you’ve ever interacted with Ethereum, you’ve likely come across ERC-20 tokens — even if you didn’t realize it. USDC, UNI, LINK, SHIB, DAI… they all follow the ERC-20 standard. But what exactly does that mean?
Let’s break it down 👇
🧩 The Big Idea
An ERC-20 token is a digital representation of an asset that lives on the Ethereum blockchain. Think of it like a programmable receipt — proof that you own something, whether it’s:
🏢 Shares in a company
🎁 Reward points in a loyalty system
🗳️ Voting rights in a DAO
💰 Cryptocurrency like DAI or USDC
🎟️ Lottery tickets for an on-chain raffle
🧸 Or even on-chain Chuck E Cheese tokens (yes, that’s a thing if someone builds it)
Essentially, ERC-20 tokens are building blocks for assets and currencies that run inside the Ethereum ecosystem.
⚙️ The ERC-20 Standard
“ERC-20” stands for Ethereum Request for Comments #20 — a technical standard proposed back in 2015. It defines a common set of rules that all tokens following this format must implement.
This standardization is what allows wallets, exchanges, and smart contracts to interact seamlessly with thousands of different tokens.
The Core Rules Include:
totalSupply()
Returns how many tokens exist in total
balanceOf(address)
Shows how many tokens a user owns
transfer(address, amount)
Sends tokens directly to someone
approve(address, amount)
Allows another address to spend tokens on your behalf
transferFrom(address, address, amount)
Moves tokens when someone has been approved
allowance(address, address)
Shows how much one address is allowed to spend from another
Because of these shared functions, every ERC-20 token “speaks the same language.”
🌐 Why It Matters
Before ERC-20, every project that wanted its own token had to write custom logic for balances and transfers — making integration with wallets and dApps a nightmare. ERC-20 unified the ecosystem, leading to the explosion of DeFi, NFT marketplaces, and DAOs we see today.
This means that:
You can store any ERC-20 token in the same wallet (e.g., MetaMask).
Exchanges don’t need custom integrations for each token.
Developers can focus on building features, not rewriting token logic.
🧠 Example in Code
Here’s what a simple ERC-20 contract might look like in Solidity:
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.20;
import "@openzeppelin/contracts/token/ERC20/ERC20.sol";
contract CheeseToken is ERC20 {
constructor(uint256 initialSupply) ERC20("Cheese Token", "CHEESE") {
_mint(msg.sender, initialSupply);
}
}This tiny contract creates a CheeseToken (CHEESE) — a fully functional ERC-20 token you could use to reward friends or power your own on-chain arcade 🎮🧀.
🏁 Final Thoughts
ERC-20 tokens revolutionized the way assets are created and exchanged on Ethereum. They turned the blockchain from a single-currency system (ETH) into a multi-asset economy where anyone can issue tokens that hold real or symbolic value.
Whether you’re minting governance tokens for a DAO, building DeFi applications, or just issuing your own on-chain Chuck E Cheese coins — ERC-20 is the foundation that makes it all possible.
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