ERC20s

ERC-20 is a technical standard used for fungible tokens on the Ethereum blockchain. It defines a common interface that allows tokens to be interacted with by wallets, exchanges, and smart contracts in a predictable way. This interoperability is a key feature that enables diverse ecosystems of tokenized assets to operate together.

The standard specifies a set of functions and events that token contracts must implement. Mandatory functions include totalSupply(), balanceOf(address account), transfer(address recipient, uint256 amount), approve(address spender, uint256 amount), allowance(address owner, address spender), and transferFrom(address sender, address recipient, uint256 amount). It also defines two events, Transfer and Approval, which are emitted on token transfers and on changes to allowances. Optional metadata functions such as name(), symbol(), and decimals() are commonly implemented to improve usability.

How it works in practice: a token contract implementing ERC-20 maintains balances for addresses and enforces rules for transfers. The transfer function moves tokens from the sender to a recipient. The approve function lets the owner authorize another address to spend on its behalf, and transferFrom executes such delegated transfers up to the approved amount. This standardization enables generic interactions across different tokens and platforms.

Applications and considerations: ERC-20 tokens are widely used for fungible assets, including many stablecoins and DeFi tokens. They enable token transfers, liquidity provision, and token-based permissions across wallets and decentralized applications. A known consideration is the approve/transferFrom pattern, which can lead to race conditions if approvals change; developers often implement careful handling of allowances or use alternative patterns, though these are outside the official standard.